Pakistan’s US dollar-denominated bonds being traded in global markets have become highly volatile, signalling the country may default on the return of $1 billion to foreign investors following Sukuk maturity in December 2022.
However, Finance Minister Ishaq Dar and his predecessor Miftah Ismail have assured investors time and again over the past few months that Islamabad will easily repay them.
The investors, however, showed panic in the wake of fast depletion of Pakistan’s foreign exchange reserves and the loss of rupee’s value against the US dollar over the past seven consecutive working days.
The yield (rate of return on bonds) on the Third Pakistan International Sukuk increased 2.6% to a new high of 145.1% on Thursday. The $1 billion bond is maturing in December 2022, a local research house reported.
The yield on the Pakistan Government International Bond spiked 4.4% to 84.8%. The $1 billion bond is scheduled to mature on April 15, 2024.
Yields on seven bonds range between 19% and 56%. They have a cumulative value of $5.8 billion with maturity from September 2025 to April 2051.
Pakistan’s central bank reported on Thursday that the foreign exchange reserves remained unchanged at $7.6 billion in the week ended on October 14. They have cumulatively dropped by around $9 billion in the past 10 months as the country continued to pay for imports and repay the maturing foreign debt.
The government has already arranged $36-40 billion from the multilateral and bilateral creditors to repay the maturing foreign debt, finance the current account deficit and boost the foreign exchange reserves to around $15-16 billion by the end of current fiscal year in June 2023. The country is currently under the IMF loan programme worth $6.5 billion, which signals that it will not default on debt repayment, according to officials.
Rupee down
Pakistani rupee continued to slide for the seventh consecutive working day as it inched down 0.03% (Rs0.07) to close at Rs220.95 against the US dollar in the inter-bank market on Thursday.
The domestic currency has cumulatively dropped by 1.45% (or Rs3.16) in the past seven days.
Earlier, it cumulatively regained 9.14% (or Rs21.96) in 13 working days to reach Rs217.79 on October 11.
Published in The Express Tribune, October 21st, 2022.
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