First phase of bankruptcy

 Due to interest rate risks and fluctuation in crude oil prices, said Omar Ayub Khan, the leader of the opposition in the National Assembly. He said that there may also be pressure on rupee-dollar parity due to the political situation in the Middle East and Ukraine and a new perfect storm is gathering again.

The capacity to absorb any shock is higher than before due to $9.5 billion foreign exchange reserves, said Ali Pervaiz but admitted that the cushion was still not enough to give comfort.

Ali Pervaiz said that this time the IMF programme will have a six-month review. Earlier, there were quarterly reviews of the IMF program.

 

DG Debt struggles

The Director General of Debt Office, Mohsin Chandna struggled to answer even simple questions raised by the members of the committee. He did not have any clear answer to the question about the savings that the government would make due to the 3% cut in the interest rates by the central bank.

The 80% of the domestic debt is on the floating rates and the impact of the interest rate reduction would be visible on it after six months, said Chandna.

He said that this fiscal year's allocation for interest payments is made based on a 17.25% average interest rate and any benefit would be accrued only when the rates come below this rate. However, earlier the Ministry of Finance had said that the budget has been made based on an 18.5% average interest rate.

Chandna also did not have the answer to the question about the interest rates on the sovereign bonds that Pakistan had floated and would mature in the coming months. The first such payment of $500 million of sovereign bonds is in September next year, followed by $1.3 billion in April 2026 and $1.5 billion in December 2027, said Chandna.

The DG debt said that due to a 0.5% reduction in the interest rates by the US Federal Reserve, the debt instruments of emerging markets will become attractive for lenders.

"Pakistan needs to enhance the maturity profile of its debt and reduce the gross financing needs", said the DG debt.