Pakistan repay $1 billion international Sukuk bonds

The State Bank of Pakistan (SBP) announced that it would repay $1 billion in international Sukuk (Islamic bonds) on December 2. The State Bank made the announcement on Friday. The Pakistan bank is all set to repay the international amount three days before the due date of maturity. Although the state bank had already paid $1.8 billion in full for the current month alone against foreign obligations. 

SBP Governor Jameel Ahmed briefed a few analysts after the Monetary Policy announcement. He said that the nation has been making regular payments to foreign creditors. Moreover, he said that he is confident that there would be no obstacles to the repayment of the nation’s foreign debt.

An attendee senior analyst said that the earlier payment may be in the processing for clearance of the payments. The $1 billion payment against the maturity of the Sukuk was still being discussed in the media. However, the international market lacks confidence. 

This has driven up the credit default swap (CDS) rate and hurt the nation’s external position. The finance minister of Pakistan, Ishaq Dar, insisted that his nation would not default. Moreover, he assured that the nation would make payments on time despite the high rate of CDS.

The finance minister said the US-based media and data company projected Pakistan’s one-year probability of default at a low of 10 percent. The minister shared Bloomberg data on Twitter about default probabilities in emerging markets.

The central bank has reassured the public that they have made plans to reimburse all foreign payments for FY23. Some expect the payments to total between $32 and $34 billion. He claimed that foreign payments have not been stopped since the start of the current fiscal year. The SBP governor asserted Pakistan pays all commercial and other debts within due dates. He claimed that because the Asian Infrastructure Investment Bank (AIIB) will supply funds, the $1 billion payment will not affect the nation’s foreign exchange reserves.

In exchange for the payment of $1 billion, he claimed, it had set the funding arrangement up. The insufficient foreign exchange reserves, declining remittances, and delayed IMF inflows have raised significant concerns about the promptness of foreign repayments. In the interbank market, the price of the dollar was 223.92 on Friday.

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