ISLAMABAD: Pakistan's Finance Minister Ishaq Dar on Friday said the South Asian country was “nowhere near default” and would fulfill its international financing obligations on time, denying former prime minister Imran Khan’s claim that the country was on the verge of a default.
Khan, who was ousted in a parliamentary no-trust vote in April, last week said he had already predicted six months ago that his ouster would adversely impact the country’s economy and destroy its ability to service its debts. Khan's comment came amid Pakistan's rising credit default swap (CDS) rating that serves as a form of insurance against default.
But the Pakistani central bank chief said a day earlier that the country would be repaying a $1 billion international bond on December 2 — three days before its due date. The statement set aside growing uncertainty about Pakistan’s ability to meet external financing obligations amid an economic crisis further aggravated by this year's devastating floods.
Citing data from Bloomberg, Dar told a Pakistani news channel that Pakistan’s one-year probability of default was at a low of 10 percent as against Khan’s claims.
"I assure you — and by the grace of God, whatever I say always proves to be true — that Pakistan is nowhere near default and it will fulfill all of its liabilities," the finance minister told the 24 news channel Friday night.
“I was disappointed to see Khan tweeting that the country was about to default. Whatever he said was not in the country’s interests as he was joining negative forces who want to damage Pakistan’s economy."
Dar’s claim was backed by financial analysts and experts earlier this week, who downplayed historic growth of the Pakistani five-year bond’s credit default swap.
CDS is a financial derivative that lets an investor offset their 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 the amount in case the borrower defaults.
Pakistan’s CDS had been steadily rising in the last few days, mainly due to lower foreign exchange reserves and political turmoil in the South Asian country.
The higher CDS rate was equated with the country’s default on payments of its five-year bonds, including $1 billion of the Third Pakistan International Sukuk bonds maturing on December 05, $1 billion of the Pakistan Government International Bond maturing in 2024, and $500 million of the Pakistan Government International Bond maturing in 2025.
