Pakistan is considering Eurobonds, loans from other countries and commercial debt to replace a $3.5 billion facility from the United Arab Emirates (UAE) and manage its foreign reserves, Finance Minister Muhammad Aurangzeb said.
Aurangzeb also told Reuters the shock from the ongoing war in the Middle East meant that Pakistan must consider a strategic petroleum reserve and a faster switch to renewable energy.
“All options are on the table,” Aurangzeb said when asked if the government was in talks with Saudi Arabia for a loan that could replace the UAE facility.
Pakistan will reportedly return a $3.5bn loan to the UAE this month, putting pressure on its reserves and risking breaches of its International Monetary Fund (IMF) programme targets.
The country has been thrust into the international spotlight as it plays the role of a mediator between the United States and Iran to end the war in the Middle East.
Aurangzeb, speaking on the sidelines of the IMF/World Bank annual spring meetings, said the country could manage all debt repayments, and that its reserves remained at roughly 2.8 months of import cover.
Maintaining at least that level, he said, would be “an important aspect of our overall macro stability as we go forward”.
“We are looking at Eurobond, we are looking at Islamic sukuk, we are looking at dollar-settled rupee-linked bonds,” Aurangzeb said, adding that they expected to issue Eurobonds this year and are also exploring commercial loans.
Aurangzeb said while the country had not yet requested any additions or changes to its $7bn IMF lending programme due to the economic shocks of the war in the Middle East, it was a potential option.
“Depending upon how things pan out over the next few weeks, that’s something which can be discussed,” he said.
The Fund’s board is likely to sign off on the latest lending tranche by the end of this month or early next month, Aurangzeb said, which would unlock just under $1.3bn via the Extended Fund Facility (EFF) and the Resilience and Sustainability Facility (RSF).
Pakistan also expects to launch its first-ever Panda bond — debt denominated in Chinese yuan — next month, he said. The $250m issue, the first of a planned $1bn programme, will be backed by the Asian Development Bank and the Asian Infrastructure Investment Bank.
Aurangzeb said the country’s expected GDP growth of close to 4pc, remittances of around $41.5 billion and targeted assistance to the poorest citizens could withstand the Iran war shock for this fiscal year, which ends on June 30.
But the price spikes meant the country should focus on establishing strategic reserves of fuels and LPG — rather than simply relying on commercial reserves — and accelerate its move towards renewable energy.
“When you go through a supply shock like this… it sends a very clear view that we need to accelerate these journeys,” he said.
