KARACHI: Pakistan has successfully made a foreign debt repayment of over $1 billion, shaking up the country’s foreign currency reserves on the day Moody’s rating agency upgraded Islamabad’s credit rating outlook to ‘stable’ from ‘negative’.
“We paid over $1 billion including interest payment at the maturity of a Sukuk today (Monday),” State Bank of Pakistan (SBP) official confirmed to The Express Tribune.
In November 2014, during the tenure of former prime minister Nawaz Sharif, the country had raised $1 billion by floating a Sukuk in the international market.
“Yes, the reserves may have decreased by over $1 billion at this time, however, one cannot say the reserves have exactly shrunk by that amount as other transactions (foreign inflows and outflows) have to be accounted for before figuring out the actual volume of the reserves,” the official added.
To recall, the country’s foreign currency reserves increased by $240 million to $8.68 billion due to official inflows during the week ended November 22, the central bank reported in a weekly update on Thursday.
“Pakistan’s foreign exchange reserve adequacy remains low,” Moody’s Investors Service said in an announcement while upgrading the country’s credit rating outlook to ‘stable’ from ‘negative’.
“Foreign exchange reserves have fluctuated by around $7-8 billion over the past few months, sufficient to cover just 2-2.5 months of goods import,” the rating agency said.
“The change in the outlook to stable is driven by Moody’s expectations that the balance of payment dynamics will continue to improve supported by policy adjustments and currency flexibility,” it added.
The government had planned to raise $1-2 billion in fresh foreign debt before the Sukuk payment was made. However, the floating of new Sukuk and Eurobond has remained pending for long. The Pakistan Tehreek-e-Insaf (PTI) government had planned to issue such bonds immediately after coming into power in July 2018. Pakistan will also pay $399.5 million in interest on all the outstanding amounts of Eurobond and Sukuks in this fiscal year.
In addition to that, the $2.3 billion worth of commercial loans would also mature during this fiscal year. This includes $1.7 billion of China Development Bank, $300 million of Bank of China, $100 million of Standard Chartered Bank and $200 million of Credit Suisse.
However, Pakistan is expected to receive second tranche worth $450 million from International Monetary Fund (IMF) sometime late in January or early in February under the IMF loan programme worth $6 billion which kick-started in July.
Published in The Express Tribune, December 3rd, 2019.