*Pakistan’s bonds slumped to just half their face value on Friday after theFinancial Times said a United Nations development agency was urging thecountry to restructure its debt.*
Devastating floods engulfed large swathes of Pakistan this month, killingmore than 1,500 people and causing damage estimated at $30 billion, fanningfears that Pakistan will not meet its debts.
A memorandum the United Nations Development Programme (UNDP)is set to handPakistan’s government this week says its creditors should consider debtrelief in the wake of the floods, according to the Financial Times.
The memorandum further proposed debt restructuring or swaps, in whichcreditors would forego some repayments in exchange for Pakistan’s agreementto invest in climate change-resilient infrastructure, the paper said.
Neither the foreign office in Islamabad or a UNDP spokesperson in Pakistanimmediately responded to Reuters’ request for comment on the memorandum.The country’s finance and information ministers could also not be reached.
The bond market reaction on Friday strengthened fears of another default byPakistan, hammering its international market government debt.
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One of the main sovereign bonds due for repayment in 2024 slumped more than10 cents to about 50 cents on the dollar , while another due in 2027 fellto about 45 cents. .
Finance Minister Miftah Ismail told a Reuters interview earlier this weekthat there was no chance of a credit default risk.
The government needs to pay $1 billion on bonds maturing in December. Ithas interest payments worth around $0.6 billion for the 2022-23 fiscal yearbut the next full bond redemption is not until April 2024.
