Pakistan’s Army Leader Seeks Aid From The US As The Risk Of Default On Debt Rises

According to a report by Nikkei Asia on Friday, Pakistan’s army chief General Qamar Javed Bajwa has contacted the US for assistance in securing an early loan disbursal from the IMF in an effort to avoid a default on debt payments.

The official liquid foreign exchange reserves of Pakistan, which are rapidly decreasing, have dropped by $754 million to $8.57 billion, according to the central bank’s report from the previous day.

In its weekly announcement on reserves, the central bank had stated that “due to external debt and other payments during the week ended on 22-Jul-2022, SBP’s reserves declined by $754 million to $8,575.1 million.”

The Pakistan army chief reportedly appealed to the White House and Treasury Department to pressure the IMF to provide the $1.2 billion assistance package that the nation is supposed to receive under a loan programme that was recently resumed, according to sources cited in the Nikkei Asia story.

If approved by the IMF board, a staff-level agreement reached by the IMF and Pakistan would allow for the transfer of $1.17 billion. The IMF also announced last week that it was considering topping up the programme.

Less than half of the $6 billion, 39-month IMF programme has been released to date due to Islamabad’s struggles to meet its goals, which were entered into January 2019.

After the government of former Prime Minister Imran Khan was overthrown in April, the IMF suspended the programme.

Even though the country’s debt is trading at distressed levels, finance minister Miftah Ismail said that a default had been avoided.

Pakistan is on the verge of a balance of payments catastrophe due to the high cost of energy imports. Its foreign exchange reserves are now barely enough to cover imports for five weeks. In relation to the US dollar, the Pakistani rupee has likewise fallen to record lows.

The unpaid subsidies that the previous prime minister, Imran Khan, provided to the oil and power sectors during his final days in office have been removed by the new administration. It also implemented a tax on fuel on July 1 that will cause prices to increase by almost 70% in a month.