Pakistan repays $1bn sukuk bond before maturity to avert default risk

Pakistan repays $1bn sukuk before maturity to avert default risk

According to the Finance Ministry, Pakistan successfully repaid $1 billion in international SUKUK bond (Islamic bonds) on December 2, three days before the bonds’ due date.

Pakistan paid the $1 billion SUKUK bond early instead of on schedule on December 5.

The payment aligned with Jameel Ahmad, governor of the SBP, who had promised a week earlier that Pakistan would pay back the $1 billion international bond on December 2.

Officials from the finance ministry claim that the early repayment of SUKUK bond helped reduce the possibility of a short-term default, however questions remain regarding Pakistan’s capacity to make long-term debt payments.

In the fiscal year 2022–2023, Pakistan has a $25 billion debt repayment obligation.

The term for a $3 billion deposit Saudi Arabia had made to Pakistan’s central bank was extended earlier on Friday, according to SBP.

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According to a statement posted on its official Twitter account, “The SFD extended the term for the deposit supplied by the Kingdom of Saudi Arabia in the amount of $3 billion to the SBP.”

According to the central bank, the deposit’s term extension “is a continuation of the support provided by the government of Saudi Arabia to the Government of Pakistan.”

According to SBP, the deposit is intended to strengthen the foreign exchange reserves in the Bank and assist Pakistan in coping with the economic effects of the COVID-19 pandemic; it, furthermore, contributed to meet external sector challenges and achieve sustainable economic growth for the country.

It is important to note that Saudi Arabia and Pakistan inked the deposit agreement in November of last year. The Saudi Fund for Development (SFD) made a $3 billion deposit with SBP in accordance with this deposit arrangement.

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