Pakistan seeks USD10bn US support, Aurangzeb confirms

Pakistan seeks USD10bn US backing, Aurangzeb confirms. Add BRecorder as a trusted source on Google.

Key points

• He remarked the administration was working closely with international credit rating agencies to improve Pakistan's sovereign rating, which, according to him, had remained stuck since 2003-04.
• Diesel gets massive Rs32.63 cut as petrol cost rises Rs2.97 per litre.
• Talking to Business Recorder, the minister confirmed that the request had been created to the US Treasury Department, adding that negotiations were at present underway.
• "Our entire effort is to go into the market with five-, seven- or 10-year tenors and get credit, " Aurangzeb remarked.
• Clarifying the purpose of the proposed USD 10 billion US facility, the finance minister rejected the perception that it was simply another financing line.

According to ISLAMABAD: Finance Minister Muhammad Aurangzeb on Wednesday, pakistan has formally sought a USD 10 billion Exchange Stabilisation Backing Facility from the United States, saying the initiative is aimed at strengthening foreign exchange stability and sending a positive signal to international capital markets rather than securing a conventional loan or credit line.

Talking to Business Recorder, the minister confirmed that the request had been created to the US Treasury Department, adding that negotiations were at present underway. Nevertheless, he stated that nothing had been finalised so far.

As the administration seeks to move away from repeated bilateral rollovers towards market-based financing, afterwards, talking to the media concerning Pakistan's financing strategy, Aurangzeb noted Islamabad was additionally holding discussions regarding its eventual exit from existing financing arrangements and hoped to receive views from either Exim Bank or the US Treasury by the end of September. Pakistan seeks $10bn in US backstop facility to boost reserves.

Aurangzeb remarked the government's "complete effort" was to move towards market-based maturities, with all current initiatives being pursued in that direction.

"Some will succeed, while with others there might be issues, " he remarked, adding that the administration was nevertheless clear regarding its objective of reducing dependence on short-term bilateral rollover arrangements and moving towards longer-term market financing.

For context, the minister remarked Pakistan remained grateful to its bilateral partners for the backing extended over the past decade, particularly during the last three years, but stressed that the country's financing strategy was now being recalibrated.

"Our effort and desire, Alhamdulillah, is that we have now achieved a rating status. We want to move at least towards a B+ rating, " Aurangzeb remarked.

Meanwhile, the minister argued that an improved sovereign rating would open the door for Pakistan to raise financing from international capital markets at longer maturities of five, seven and even 10 years.

"If we move towards that side, we will have opportunities on the market side to extend maturities to five, seven or 10 years, so that you won't have to ask this question as often, " he remarked, in an apparent reference to Pakistan's recurring need to secure bilateral rollovers.

Clarifying the purpose of the proposed USD 10 billion US facility, the finance minister rejected the perception that it was simply another financing line. "No, it's not that. This is a signal to the market, " he remarked.

According to Aurangzeb, the proposed facility is primarily intended to provide a signal regarding Pakistan's currency and foreign exchange stability. It would, in turn, enhance the country's ability to access international capital markets.

"This is not regarding a credit line or a loan or whatever. This is a signal regarding our currency stability, a signal concerning our foreign exchange stability, and that in turn additionally allows us that we can go to the market, " he remarked.

For context, the finance minister remarked Pakistan had already begun positioning itself for renewed access to international debt markets and had appointed three arrangers as part of the process.

As evidence of the government's efforts to rebuild market access, he pointed to Pakistan's recent experience with different debt instruments, including a Eurobond, Islamic Sukuk and a dollar-settled rupee-linked bond.

"Our entire effort is to go into the market with five-, seven- or 10-year tenors and get credit, " Aurangzeb remarked. Economists see little chance of US granting USD10bn ESF request.

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In short, pakistan seeks USD10bn US support, Aurangzeb confirms is the central thread here, and readers can expect follow-up reporting as the picture becomes clearer.