Falling deeply into arrears

Technically, Pakistan has not defaulted on its debt because it hasn’t missed — or even delayed — any payment to its creditors. Yet it certainly has fallen into ‘arrears’. For example, last week, the global International Air Transport Association complained that Pakistan was second among the top five markets that have restricted or stopped foreign airlines from repatriating their ticket sales revenues of nearly $225 million to their home countries. So, technically, we haven’t defaulted but simply fallen into arrears. This is just one of the many examples of how the country’s central bank is struggling to protect its liquid foreign currency reserves, which were reported to have sunk to the four-year low of $6.7 billion on December 2 following the payment of $1bn Sukuk bonds. Ask a foreign company executive, and they will tell you how difficult it has become for their shareholders to repatriate their dividends or profits. This is happening on top of the administrative actions by the State Bank of Pakistan to restrict imports to prevent the existing foreign exchange stocks from disappearing. So you cannot blame the markets if they don’t respond to the attempts of finance minister Ishaq Dar and central bank governor Jameel Ahmed to reassure them that Pakistan can meet all its future external debt payments.