Pakistan will absolutely make every payment: Miftah Ismail – Pakistan

Finance Minister Miftah Ismail reiterated on Monday that Pakistan will meet all its payment obligations as its financing needs remain fully met.

“It’s all settled now,” Miftah said in a phone interview with Bloomberg. “Pakistan will absolutely make every payment and every obligation.”

The statement comes just days after Acting Governor of the State Bank of Pakistan (SBP), Dr. Murtaza Syed, said that Pakistan’s $33.5 billion external financing requirement was fully met for the 2022/23 financial year.

“Our external financing needs over the next 12 months are fully met, supported by our ongoing IMF program,” Dr Syed said.

On July 14, the International Monetary Fund (IMF) announced its staff-level agreement with the Pakistani authorities for the disbursement of $1.17 billion in critical financing as part of the resumption of bailout payments. .

Although crucial, the IMF disbursement is far from sufficient for Pakistan’s external financing needs which have been estimated at over $34 billion. As foreign exchange reserves reach critical levels, Pakistani economic policymakers have scrambled desperately to secure dollar inflows, with the finance minister repeatedly allaying fears that the country will meet all its obligations.

During his telephone interview, Miftah said Pakistan had avoided the risk of default, thanks to progress on a loan from the stalled IMF program, followed by government measures including spending cuts.

“With the commodity super cycle and the Russian-Ukrainian war, oil prices skyrocketing and gas skyrocketing like never before in history, Pakistan and other emerging countries have faced the worst crisis,” he said. “Nevertheless, Pakistan – by having an IMF program, introducing a significant tight budget and lowering import demand – has weathered the storm.”

On Sunday, Miftah said the government’s efforts to reduce imports had finally paid off and the country’s import bill had shrunk by $2.7 billion as the country only imported goods worth 5 billion dollars than in July, against 7.7 billion dollars the previous month (June). .

He said dollar inflows should improve in the coming weeks, while the lower import bill would help ease pressure on the local currency which lost 14.5% in July, the biggest drop. monthly in more than 50 years.

The Ministry of Finance and the central bank, in a joint statement on Sunday evening, also said that the rupiah temporarily broke above the downtrend, but is expected to appreciate in line with fundamentals over the coming months.

“About half of the rupiah’s depreciation since December 2021 can be attributed to the global surge in the US dollar, following historic Federal Reserve tightening and heightened risk aversion,” reads the statement. a joint statement on current economic challenges and Pakistan’s strategy for them. the fiscal year (FY23).

“Of the remaining half, some is driven by domestic fundamentals, in particular the widening current account deficit, particularly in recent months…the remaining depreciation has been overblown and driven by sentiment.”

The authorities further dismissed rumors suggesting that a particular level of the exchange rate has been agreed with the International Monetary Fund (IMF), calling it “completely unfounded”.

“The exchange rate is flexible and determined by the market, and will remain so, but any disorderly movement is countered,” he said.

“The Rupee may temporarily top as it has done recently. However, it moves both ways over time. We expect this pattern to reassert itself in the coming period. As a result, the Rupee is expected to strengthen in line with improving fundamentals in the form of a lower current account deficit as well as stronger sentiment,” the statement read, a rare occurrence of a joint announcement by the Ministry of Finance and of the SBP.

The rupiah appreciated slightly on Monday, with the currency closing at 238.84 against the US dollar in the interbank market. The gain in the open market, however, was more substantial.

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Elaine R. Knight