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Pakistan to meet ‘external debt servicing obligations’

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  • Pasha says govt in talks with Saudi Arabia and China for loans.
  • “We will ensure our foreign debt requirements are met,” she says.
  • Pakistan faces uphill task as it has to pay $8.3bn in next 3 months.

Minister of State for Finance and Revenue Dr Aisha Ghaus Pasha stressed Thursday that Pakistan would not default on its international obligations and the government would ensure timely external debt payments.

The minister’s comments came as — despite assurances from the government about the country’s finances — the situation remains gloomy and experts warn of an economic crunch ahead.

In conversation with journalists in Islamabad, the state minister added that there is “no chance” of Pakistan’s default as authorities were in talks with Saudi Arabia for a $3 billion loan and the same amount from $3 billion.

“We will also ensure that our foreign debt requirements are met,” the minister said, as Pakistan faces an uphill task of repaying the loans amid depleting forex reserves.

Minister of State for Finance and Revenue Dr Aisha Ghaus Pasha speaks in this undated photo. — Twitter/@aishagpasha
Minister of State for Finance and Revenue Dr Aisha Ghaus Pasha speaks in this undated photo. — Twitter/@aishagpasha

The foreign exchange reserves held by the State Bank of Pakistan (SCP) stood at $6.11 billion on December 22, 2022, against $10.8 billion in April 2022 when the coalition government regime took over the reins of power after ousting Imran Khan through the vote of no-confidence.

Amid a crisis-like situation, Pakistan will have to repay approximately $8.3 billion in the shape of external debt servicing over the next three months (Jan-March) of the current fiscal year.

The government is eyeing to pass the ninth review of the International Monetary Fund (IMF) to secure a $1.7 billion bailout package, but both sides have made no substantial headway in recent days.

In this regard, the minister said the money lender’s annual holidays were underway, but the Pakistani authorities were in contact with them over the Extended Fund Facility (EFF).

Pasha also said Minister for Finance and Revenue Senator Ishaq Dar would meet the Fund’s officials at the international donor’s conference in Geneva on January 9.

The country aims to gather funds from global donors as cataclysmic floods had battered the nation and caused damages worth $30 billion despite Pakistan being one of the lowest carbon emitters.

“Maybe our friendly countries are waiting for the donors’ conference so they can help us [and provide loans],” Minister Planning and Development Ahsan Iqbal told Geo News’ Shahzeb Khanzada earlier this month.

In his address to investors at the Pakistan Stock Exchange (PSX) on Wednesday, FinMin Dar said that the country will not default but did admit that the economy was in a “tight position”.

“It’s been three months since I took charge and we listen every day that there is going to be a default. How will there be a default? There is no chance that Pakistan will default,” the finance minister assured the investors.

Dar assured that Pakistan would survive and is managing itself but conceded that the economy was in a “tight position”.

He added that the country does not have the $24 billion reserves that the Pakistan Muslim League-Nawaz (PML-N) left in 2016 but that was not his fault.

“The fault is in the system and we must ensure Pakistan goes forward,” said the finance minister.

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In a first for history, PSX crosses the 77,000 milestone.

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At 77,213.31, the benchmark KSE-100 hit an all-time high, up 1,005.15, or 1.32%, from the previous close of 76,208.16.

The government’s readiness to seal an agreement with the International Monetary Fund (IMF) following the budget was cited by analysts as the reason for the upward trend.

Experts anticipate that in an attempt to bolster its position for a fresh bailout agreement with the International Monetary Fund (IMF), the budget for the fiscal year ending in June 2025 would set aggressive fiscal goals.

Budget for Pakistan, 2024–2025
Pakistan’s budget for the fiscal year 2024–25, with a total expenditure of Rs18.877 trillion, was presented on Wednesday by Minister of Finance and Revenue Muhammad Aurangzeb.

The Finance Minister, Muhammad Aurangzeb, outlined the budget highlights. He stated that the GDP growth target for the fiscal year 2024–25 is set at 3.6 percent, while the inflation rate is anticipated to stay at 12 percent.

He stated that while the primary surplus is anticipated to be 1.0 percent of GDP during the review period, the budget deficit to GDP is forecast to be 6.9 percent over the period under review.

According to the minister, tax income collection increased by 38% in the current fiscal year, and the province will receive Rs7,438 billion. The Federal Board of income expects to earn Rs12,970 billion in revenue for the upcoming fiscal year.

In contrast to the federal government’s projected net income of Rs9,119 billion, he stated that the federation’s non-tax revenue projections are set at Rs3,587 billion.

The federal government’s total outlays are projected to be Rs18,877 billion, with interest payments accounting for the remaining Rs9,775 billion.

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Pakistan currently has $14.38 billion in foreign exchange reserves.

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Pakistan’s commercial banks’ reserves, which stood at $5.28 billion at the conclusion of the week ending on June 7, rose by US$174 million, according to a central bank statement.

Reserving US$6.2 million less, the SBP now has US$9.10 billion in reserves. The causes for the decline in the reserves it had were not disclosed by the central bank.

The SBP released a statement that stated, “SBP reserves decreased by US$ 6 million to US$ 9,103.3 million during the week ended on 07-June-2024.”

The State Bank of Pakistan’s (SBP) foreign exchange reserves were reduced by US$ 63 million as a result of repaying external debt, with the reserves standing at US$ 9.093 billion as of earlier on June 6.

The central bank spokesperson said in a statement that as of the week that concluded on May 31, the nation’s total liquid foreign reserves were $14.31 billion.

In terms of net foreign reserves, commercial banks have US$ 5.22 billion of the overall foreign reserves, according to the SBP.

SBP reserves dropped by US$ 63 million to US$ 9,093.7 million during the week that ended on May 24, 2024, according to the announcement.

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In the local market, the price of gold plummets to Rs240,700/tola.

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Gold with a 24-karat purity level has dropped by Rs1200/tola on the local market.

Each tola of 24-karat gold is now selling for Rs240,700, with a further drop of Rs1029 bringing the price of 10 kilos of gold to Rs206,361. These figures are courtesy of the All Sarafa and Jewelers Association.

Meanwhile, after a $2 decline on the global market, one ounce of gold will be valued $2315.

A tola of gold was worth Rs 600 more on Wednesday.

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