SBP Governor: Pakistan has sufficient funds to pay its debts to other countries.

Jameel Ahmad, governor of the State Bank of Pakistan (SBP), stated on Monday that the nation has sufficient funds to pay its foreign debt obligations.
There is no need to be concerned about a lack of foreign exchange liquidity, Mr. Ahmad told the press after a ceremony at the Institute of Business Administration (IBA). “We have almost $7.9 billion in reserves. They’re more than enough to fulfil any commitments, the governor declared.

Due to the servicing of external debt, which included a $500 million commercial loan repayment to China, the SBP’s foreign exchange reserves decreased by $956 million during the week ending on November 4. The governor of the SBP made his statement at the same time as Pakistan’s risk of sovereign default reached a multi-year high at the end of last week.

Five-year CDS has significantly increased, refuting his argumen.
On Nov. 11, the nation’s five-year credit default swap (CDS), which functions as insurance against the risk of sovereign default, climbed by over four percentage points on a daily basis. The increasing CDS level reflects investors’ waning faith in Pakistan’s capacity to repay its international debt.

The five-year CDS increased 4,210 basis points, or 42.1 percentage points, month over month, according to Arif Habib Ltd. This brings the total to 6,419 basis points. The end of this week will see the clearing of all letters of credit (LCs) totaling less than $100,000, according to Mr. Ahmad. The recent limitations on the outflow of foreign exchange prevented many enterprises, particularly those that supply the domestic market, from paying their international suppliers in dollars.

“We’re also facilitating imports for projects that are export-oriented. Some companies have projects that are almost finished. Their imports have been approved. Additionally, we are permitting the equivalent of 50–60% of their prior imports for select particular sectors, stated Mr. Ahmad without going into greater detail. The SBP governor stated that the team from the central bank investigating the suspected manipulation of the currency rate by more than eight commercial banks will finish their work by the end of November. Then, he added, “We’ll take all the necessary regulatory actions.”

The SBP governor had earlier officially opened the IBA’s Finance Lab, which will give students access to real-time data from the capital markets. The lab was established by the institute’s business school in partnership with Muhammad Azfer Naseem, an IBA alum who runs Alpha Capital Securities in Karachi. The SBP governor suggested that the Finance Lab look into working with other fields to perform research on business operations, market size, and value chain evaluations of various products from the standpoint of development and innovation.

He also recommended that the lab work with credit bureaus to develop and test credit-scoring models, particularly ones that are based on alternative data or otherwise targeted at groups of people and enterprises with little or no collateral and a short credit history.

 

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