Islamabad:
Pakistan has complied with the condition of the International Monetary Fund (IMF) to increase the expiration profile of its debt by withdrawing short -term loans and the Government also hopes to reach a foreign commercial loans of $ 1 billion in April.
The development reached the steps of some improvement in the debt indicators, including the expected deceleration in the pace of accumulation of debt to a single digits after a long time. The Debt Office, which now directly informs the Secretary of Finance, has taken certain initiatives to reduce the interest rate and the risks of debt refinancing.
Against the IMF condition of increasing the current average expiration time of the debt of two years and eight months, the Finance Division managed to increase it to three years and three months in December, according to the data compiled for the IMF review as of Monday.
The first formal program for review of the program between Pakistan and the IMF will begin on March 3 and continue until March 14. Its successful conclusion will lead to the release of the second section of loan of approximately $ 1.1 billion.
The performance of Pakistan in terms of expiration of the debt is much better than the objective of the end of June 2025 established by the IMF. This has reduced the risks of refinancing and interest rate and will also decrease the dependence of the government of commercial banks.
The average expiration time is the weighted average refund period of the existing debt. The IMF has been pointing out to increase the expiration period to address the risk of reinvestment.
The expiration objective has been achieved by changing the composition of the internal debt, which is RS49 billion, to the long-term Pakistan investment bonds (GDP), while reducing the dependence of the short-term treasure invoices (T-Fils), said Eraj Hashmi, director of the debt office.
He said that the deliberate movement not only mitigated the risks of overturn, but also attracted investors, who sought long -term stable yields, reinforcing confidence in the Pakistan debt management strategy.
The Ministry of Finance is also trying to ensure a foreign commercial loan of $ 1 billion in the back of a credit guarantee of $ 500 million administered by the Asian Development Bank (ADB). Pakistan has not been able to obtain a new foreign commercial loan due to its bad qualification. As a solution, you will use the ADB warranty.
The sources said that commercial banks based in London had shown interest and that the terms were being completed. Among these are Standard Chartered and Deutsche Bank. A Chinese bank has also shown interest.
The government has also been trying to increase the debt of Chinese markets, but it is a long process and now hopes to raise up to $ 250 million for next year. The internal evaluation shows that panda bonds will attract around 3.5% interest rate, which is much lower than rates of up to 8.5% to emit Eurobonds.
The Finance Division has managed to restrict the accumulation of debt to a single digits, partially helped by the reduction of the interest rate. In the last fiscal year, there was an increase of RS8.4 billion in debt actions, which shows an increase of 13.3%.
The evaluation of the Finance Division is that the accumulation of debt will be reduced to less than 9% in this fiscal year and the net increase will not more than RS6.3 billion. See the public debt that grows at RS77.5 billion in June of this year.
During the first half of the current fiscal year, RS2.8 billion had been added to debt shares at a rate of 3.9%.
The Ministry of Finance said it would continue to implement the debt repurchase policy and that next week it would buy pibs. Previously, I had bought RS1 billion T invoices, which resulted in RS31 billion savings in the cost of interest, according to the Ministry.
This will continue in the second half of this fiscal year through the purchase of bonds instead of Tacks T.
The Ministry said that in the first six months of the current financial year, it withdrew the debt of RS1.7 billion RS1.7, which reduces the dependence of commercial banks. The reason was the payment in advance of RS2.5 billion profits by the Central Bank.
As a result, the T-Bills portfolio decreased RS1.5 billion, which will positively affect the gross financing needs of next year.
In June last year, banks had 81% of government values. Now, their holdings were 67%.
The Ministry of Finance said that the government had contained external debt since Prime Minister Shehbaz Sharif assumed the position in March last year. The total external debt remained stable at $ 86.6 billion during the period, showing effective debt management and the reluctance to take unnecessary debt, he added.
The narration of Pakistan’s debt is no longer despair but of determination, discipline and decisive action, he said Hashmi. Through strategic reforms, the government has slowed the accumulation of debt, he added.
The Government also hopes to save RS1 Billones due to the reduction of the interest rate. Against the assignment of RS9.8 billion, the cost can float around RS8.7 billion. In the second half, the estimated interest payment is RS3.6 billion, said the Ministry of Finance. During the first half, RS5.1 were spent on interest payment.
The Ministry will carry out the first government bond repurchase auction on Monday. This strategy is aligned with international best practices and demonstrates the government’s ability to withdraw debt before expiration.
