Bondholders are bracing for a possible default by Pakistan

Bondholders are bracing for a possible default by Pakistan

Bondholders are bracing for a possible default by Pakistan, which is struggling to meet billions of dollars in debt repayments by June, reported Bloomberg.

According to Fitch Ratings, the country’s dollar bonds due next year fell to their lowest level since November as investors weighed the country’s ability 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 year fell 1.4 cents to 51.62 cents on the dollar, falling for the third day in a row. Moody’s Investors Service outlined in a statement earlier this week that the country’s external financing needs for the fiscal year ending June are estimated to be around $11 billion, including $7 billion in external debt payments.

It is worth mentioning that Moody’s downgraded Pakistan further into junk status on Tuesday as the country faces its worst economic crisis in decades, with foreign reserves plummeting and inflation reaching a record high. The credit rating agency’s analysts said that disbursements may not be secured in time to avoid a default in the current extremely fragile balance of payments situation.

In a similar response, London-based emerging-market analyst Edwin Gutierrez said, “There is definitely a higher risk for a default as negotiations with the Fund keep getting drawn out longer than expected while reserves continue to dwindle to precarious levels”.

Meanwhile, Spokeswoman Mao Ning of the Chinese Foreign Ministry said during a regular briefing today, “The Western-led commercial creditors and multilateral financial institutions are the basic creditors for developing countries, so China calls for a concerted effort of all parties to play a constructive role on the economic and social developments of Pakistan”.

The Chinese foreign ministry has urged all creditors to play a constructive role to help Pakistan.