Business

‘Pakistan may need to find alternative financing sources

Portfolio manager for emerging markets says debt crunch looms for weaker economies

REUTERS April 12, 2023

If Pakistan fails to rationalise property valuation rates, it will permanently lose the loan quota of $147 million. PHOTO: FILE

WASHINGTON:

A combination of sticky high interest rates and lacklustre global growth could push a number of emerging economies that are facing soaring refinancing needs into debt difficulties next year.

Many weaker economies navigated the fallout from the COVID-19 pandemic and the war in Ukraine with financing aid from multilateral and bilateral lenders.

But repayments on emerging markets’ high-yield international bonds will total $30 billion in 2024, a steep increase compared to the $8.4 billion left for the remainder of this year. This adds a layer of complexity to more vulnerable countries if some issuers can’t refinance their debt soon.

Meanwhile countries such as Pakistan, Tunisia and Kenya “would need to find alternative sources of financing if the market doesn’t re-open for them,” said Thys Louw, portfolio manager for the emerging markets hard currency debt strategy at Ninety One, in London.

Investors are concerned over refinancing risks for Kenya’s $2 billion bond maturing in June 2024, said Merveille Paja, EEMEA sovereign credit strategist for BofA.

“The market expects more solutions to be delivered, either the IMF’s resilience and sustainability trust or $1 billion external issuance or syndication loan,” Paja told Reuters.

The resilience and sustainability trust, approved a year ago, is a lending facility for climate and pandemic preparedness for low-income and some middle-income nations.

“In Pakistan and Tunisia, the finalisation of the IMF programme will be an important step to avoiding a default as that would unlock bilateral and multilateral financing,” added Louw.

Pakistan’s refinancing needs for 2024 stand at 12% of its international reserves.

Published in The Express Tribune, April 12^th, 2023.

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COMMENTS (3)

test | 1 year ago | Reply I would start my suggestion but before I would like to say that elite class must know the difference between assembling and manufacturing. A common educated man has to understand the difference between assembling and manufacturing. Stop here and search on internet the difference between assembling and manufacturing and then come to this following comment. Why need financing when you can produce things locally. For example if there is an energy issue use coal which is in abundance and if there is climate issue then stop using coal and focus on solar wind and hydro power. If there is water issue then build dams using foreign investors money like China Saudi Arabia Iran Russia UAE Qatar Malaysia Indonesia Nigeria etc. If there is food insecurity stop issuing licenses to housing societies and push for more corps production by giving advantage to famers over mills and housing societies. If there is dollar issue switch to local currencies in trade with other countries and if necessary go for currency swap agreements with other countries. If there is no money for machinery build machines using local raw material and local talent and with the help of engineering and financial experts inside the country.

Saleem Mir | 1 year ago | Reply You mean Zardari Sharif and Dar s Bank accounts

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