Pakistan 5-year CDS drops by 3,168bps DoD to 5,882bps

December 14, 2022 (MLN): Following the payments of Sukuk Bonds worth $1 billion by the State Bank of Pakistan (SBP), Pakistan’s Credit Default Swap (CDS) continued to fall as 5-year CDS recorded a drop of 3,168 basis points (bps) to 5,882 bps.

Earlier this month, the payment was made three days earlier before the maturity to avert the default threat.

After reaching its all-time high of 12,388 bps on November 22, 2022, the CDS witnessed a plunge of 6,506 bps.

SBP governor Jameel Ahmad assured that the country will make all the maturing debt repayments on time, as it is to return only $4.7bn in actual in the remaining fiscal year.

In the latest SBP Podcast, he said, SBP has enough reserves to repay all obligations in an effective manner and the inflows expected will boost forex reserves.

The government is also in talks with a friendly country for the disbursement of a $3bn loan and negotiations with multilateral agencies are progressing, for further financial support.

The debt profile of Pakistan is composed of bilateral and multilateral creditors and only a small percentage is owed to foreign banks, he noted.

While, Finance Division in its latest statement noted, “With the efforts of the current government, the IMF program has come back on track and negotiations leading to 9th Review are now at an advanced stage.”

The government’s recent efforts have resulted, amongst others, in lower current account deficits in recent months and the achievement of FBR revenue targets.

On the IMF front, the discussions between the fund and the government to date in the context of the 9th review of Pakistan's Extended Arrangement under the Extended Fund Facility (EFF) have been productive, Esther Pérez Ruiz, IMF Resident Representative in Pakistan said in a statement issued yesterday.

“The IMF looks forward to continuing the dialogue over policies that adequately address the humanitarian and rehabilitation needs from the floods while also preserving fiscal and external sustainability given available financing,” she noted.

It is pertinent to mention that The IMF’s 9th review for the release of the next tranche has been pending since September 2022.

Since the country’s foreign exchange reserves are melting down, there is a dire need for external financing and prolonged delays would create more chaos in the market.

At present, Pakistan’s foreign exchange reserves stood at $12.58bn as of December 2, 2022.

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