Bondholders are bracing for a possible default by Pakistan, which isstruggling to meet billions of dollars in debt repayments by June, reportedBloomberg.
According to Fitch Ratings, the country’s dollar bonds due next year fellto their lowest level since November as investors weighed the country’sability to honor $7 billion in repayments in the coming months, including a$2 billion Chinese loan due in March.
As per research, Pakistan’s 8.25 percent bond due in April of next yearfell 1.4 cents to 51.62 cents on the dollar, falling for the third day in arow. Moody’s Investors Service outlined in a statement earlier this weekthat the country’s external financing needs for the fiscal year ending Juneare estimated to be around $11 billion, including $7 billion in externaldebt payments.
It is worth mentioning that Moody’s downgraded Pakistan further into junkstatus on Tuesday as the country faces its worst economic crisis indecades, with foreign reserves plummeting and inflation reaching a recordhigh. The credit rating agency’s analysts said that disbursements may notbe secured in time to avoid a default in the current extremely fragilebalance of payments situation.
In a similar response, London-based emerging-market analyst Edwin Gutierrezsaid, “There is definitely a higher risk for a default as negotiations withthe Fund keep getting drawn out longer than expected while reservescontinue to dwindle to precarious levels”.
Read Top Stories
Meanwhile, Spokeswoman Mao Ning of the Chinese Foreign Ministry said duringa regular briefing today, “The Western-led commercial creditors andmultilateral financial institutions are the basic creditors for developingcountries, so China calls for a concerted effort of all parties to play aconstructive role on the economic and social developments of Pakistan”.
The Chinese foreign ministry has urged all creditors to play a constructiverole to help Pakistan.