KARACHI: The country’s default risk as measured by five-year credit-default swaps (CDS) rose to alarming level of 75.5 percent amid political turmoil and uncertainty over IMF talks.
According to statistics released by research company Arif Habib Limited, the CDS increased to 75.5% on Wednesday from 56.2pc the day before.
The schedule for talks between Pakistan and the IMF was readjusted last week, according to official sources in Washington, although the negotiations are still ongoing. But according to media reports, the talks that were supposed to start in early November have been moved to the third week of this month.
According to these reports, the talks would resume after Pakistan fulfilled its pledge to adjust sales tax on petroleum products and took other measures required under a loan agreement revived earlier this year.
Pakistan is scheduled to pay $1 billion on Dec 5 against the maturity of five-year sukuk, or Islamic bonds. The finance minister has repeatedly assured for sukuk payment, but the international market is not ready to rely on assurances as the country’s economy struggles to avoid default by borrowing more from the markets, donors, commercial banks and friendly countries.
The day-to-day increase in the CDS reflects a grave situation, making it increasingly difficult for the government to raise foreign exchange from markets either through bonds or commercial borrowings.
The country requires $32bn to $34bn this fiscal year to meet its foreign obligations.
Financial experts said the country still needed about $23bn through the remaining fiscal year.
With Pakistan still participating in the IMF program, the World Bank, Asian Development Bank, and Asian Infrastructure Investment Bank can provide funding.
As the fiscal deficit increased in the first quarter, the situation is getting worse despite Pakistan’s commitment to the IMF to reduce the deficit by Rs1,500 billion in the current fiscal year.
