ISLAMABAD: Pakistan’s State Minister for Finance Aisha Ghaus Pasha on Friday assured the nation that the country was not facing any risk of going to default, local media reported, amid reports that the country’s perceived risk of default had sharply risen to 79.33 percent.
Pakistan’s five-year credit-default swaps (CDS) increased from 7,550 basis points (bps) on November 15 to 7,933 bps on November 16, constituting a single-day of increase of 383.8 bps, according to the statistics released by an independent brokerage house, Arif Habib Limited, on Thursday.
The CDS is a financial derivative that allows an investor to swap or offset credit risk with that of another investor. To swap the risk of default, the lender buys a CDS from another investor who agrees to reimburse them if the borrower defaults. The default risk perception stood at seven percent in March this year.
But Pasha ruled out the possibility of a default when a lawmaker questioned her at a session of the National Assembly, the lower house of Pakistan parliament.
“Alhamdulillah [Thank God], there is no such possibility,” the minister was quoted as saying by Pakistan’s Dawn newspaper.
“Yes, we were worried when we took over the government [in April] because at that time the IMF program was suspended and the avenues of getting external finances were closed for us.”
Pakistan is currently in a $7 billion IMF program that it secured in 2019. The cash-strapped South Asian country seeks further inflows to bolster its foreign currency reserves that have plunged to $7.959 billion as of November 17.
The IMF staff mission is expected in Islamabad by the end of the month, but the date has not yet been finalized as the fund wants Pakistan to first make the required fiscal adjustments.
Pasha said the situation had improved a lot after the government took some “very difficult decisions” and following the revival of the IMF program.
She said it was a fact that the country was unable to borrow money from other multilateral and bilateral agencies and even commercial market to finance its external needs due to the suspension of IMF program in the past, according to the Dawn report.
However, the minister said, after the successful seventh and eighth reviews of the IMF program, there was no immediate threat of Pakistan going to default.
She said the country’s exports had improved, foreign remittances were pouring in and the situation of foreign direct investment was getting better. Pakistan was now on the IMF’s track and committed to its program, Pasha added.
