ISLAMABAD    -   Pakistan will “absolutely not” default on debt obliga­tions despite catastrophic floods, said Finance Min­ister Miftah Ismail on Sun­day, signalling there would be no major deviation from reforms designed to stabi­lise a struggling economy.

“The path to stability was narrow, given the challeng­ing environment, and it has become narrower still,” Is­mail said at his office. “But if we continue to take pru­dent decisions — and we will — then we’re not going to default. Absolutely not.” Pakistan was able to bring an International Monetary Fund (IMF) programme back on track after months of delay, thanks to tough policy decisions. But the positive sentiment was short-lived before the cata­strophic rainfall hit.

Despite the disaster, Is­mail said that most stabi­lisation policies and targets were still on track, includ­ing increasing dwindling foreign exchange reserves. Central bank reserves stand at $8.6 billion, de­spite the influx of $1.12 billion in IMF funding in late August, which are only enough for about a month of imports. The end-year target was to increase the buffer up to 2.2 months. He said Pakistan will still be able to increase reserves by up to $4 billion, even if the floods hurt the current account balance by $4 bil­lion in more imports, such as cotton, and a negative impact on exports. How­ever, he estimated the cur­rent account deficit will not increase by more than $2 billion following the floods.

“Yes, there has been substantial loss to the very poorest people and their lives will never be made whole again. But in terms of servicing our external and local debt, and being micro- macro-economically stable, those things are under control.”

He said global markets were “jittery” about Paki­stan, given the economy had suffered at least $18 billion in losses after the floods, which could go as high as $30 billion. “Yes, our credit default risk has gone up, our bond prices have fallen. But…I think within 15 to 20 days, the market will normalise, and I think will under­stand that Pakistan is committed to being pru­dent.” Pakistan’s next big payment — $1 billion in international bonds — is due in December, and Is­mail said that payment would “absolutely” be met. Ismail said exter­nal financing sources were secured, includ­ing over $4 billion from the Asian Development Bank (ADB), Asian In­frastructure Investment Bank and World Bank.

This includes $1.5 bil­lion next month from ADB under the Counter­cyclical Support Facil­ity — a budget support instrument. The minis­ter also said about $5 billion in investments from Qatar, the UAE and Saudi Arabia would ma­terialise in the current financial year.The three announced interest in investing in Pakistan earlier this year, but no timelines or exact plans have been reported yet. He said $1 billion in UAE investment will “definitely materialise” in the next couple of months in the form of purchases in the Paki­stan stock market. Read full story Some $3 bil­lion in Qatari invest­ment pledges will all come within the finan­cial year to June 2023, he added.