After the catastrophic floods, Pakistan announced that the country will not default on debt obligation. In the middle of September, the finance minister of Pakistan signaled no major deviation from reforms for the struggling economy. Although the floods affected 33 million Pakistanis and caused billions of dollars of damage, Pakistan will not default. Based on Reuters, the Finance Minister, Miftah Ismail said that stability is challenging due to the environment, and yet remains challenging due to the situation. However, he added that the country continues to decide not to default.
After many months of delay, Pakistan could finally bring the International Monetary Fund Programme bank on their track. The success was from the tough policy decisions. However, there was a positive sentiment shortly before the disaster occured. The Finance Ministry urged that although the disaster brought severe damage, policy’s stabilization and targets are still under control. This includes the wellness in the foreign exchange reserves. Despite the influx of $1.12bn in IMF funding, central bank reserves could still stand at $8.6bn. This is only sufficient for a month of imports.
He confidently argued that Pakistan could still be able to increase reserves by more than $4bn. The flood was indeed attacking the current account balance in imports such as cotton, the country still has hopes. But this is to note that he also estimates the deficit will not improve by more than $2bn due to the disaster. Thus, he added that there have indeed been many losses to the very poorest people, their lives are at stake, they could never go back as a whole again. Hence, in terms of external and local debt, macroeconomic stability is still under control.