Pakistan’s dollar bonds plunge to record lows as country fears debt default – ThePrint – Select

NEW DELHI: Shehbaz Sharif, Pakistan’s prime minister, has said ‘hell could break loose’ if the country does not receive debt relief following floods that killed more than 1,500 people and caused estimated damage over $30 billion. The warning, made in a interview with Bloombergled Pakistan’s sovereign bonds – instruments it uses to raise funds from international investors – to plunge to historic lows amid fears the the country may default on its loans.

Pointing to a “gaping gap” between the country’s needs and the aid on offer, the prime minister said Pakistan had appealed for help from the the parisian club— a group of 22 major lending nations that meets ten times a year to consider relief for heavily indebted countries.

The prime minister said that in addition to the Paris Club, Islamabad would seek help from China, to which Pakistan owes about $30 billion, or a third of its total external debt.

Unless we get substantial relief,” Sharif explained, “how can the world expect us to stand up? It’s just not possible.

The comments raised fears that Pakistan is preparing to default on Eurobonds that mature in December. “I’m not sure if that’s the intended consequence of the Prime Minister’s comments, but that’s how the market interpreted it,” said Abdul Kadir Hussain of Dubai-based Arqaam Capital, which owns the obligation due in December.

Minister of Finances Miftah Ismail replied reiterating an earlier promise that the country would pay the billion dollars due in December “on time and in full”. Pakistan’s call for debt rescheduling was limited to the Paris Club, Ismail said, adding that the country “did not seek or need relief from commercial banks or Eurobond creditors.”

Ismail said Pakistan’s Eurobond debt was only $8 billion until 2051, “which was not a heavy burden.”

Last month, Pakistan got a $1.1 billion lifeline from the International Monetary Fund, to help it avoid default amid a multiple economic crisis, complicated by long-standing political instability. The funds were part of a $6 billion bailout negotiated in 2019, which stalled after Pakistan failed to meet reform conditions.

Economists have warned that IMF assistance may prove insufficient to avert a default crisis unless Pakistan secures the additional external financing it expects from its West Asian partners. The country’s foreign exchange reserves now stand at $8.3 billion, which will cover less than two months of imports.

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