Pakistan keen on purchasing Russian oil, says Ishaq Dar

Finance Minister Ishaq Dar said on Wednesday that the government of Pakistan is actively pursuing the purchase of cheaper oil from Russia.

Speaking to media after the 'All Pakistan Chartered Accountants Conference 2022 on Sustainability, Technology and Transformation in Islamabad', he said that if India could benefit from buying Russian oil, Pakistan could as well.

“We will not ink a deal on terms that are worse than India’s,” he said. “I have told this to relevant quarters in Washington and so far, there has been no resistance against it.”

He also said that the rupee was undervalued and it would soon recover to Rs200 per dollar mark, which is "its real value".

Dar asked the business community to give confidence to the market.

“I assure you that we have ample foreign exchange reserves and they will not pose a problem for the country,” he said.

Speaking about inflation, he said that it has been a gradual process that emerged over the past four years “due to the incompetence of the previous government”.

“It will take time to recede,” the finance minister said. “When macroeconomic indicators stabilise, inflation will fall.”

Dar's comments come as Pakistan's finances have been strained further after this month's floods, with the cost of repairing the damage and providing support for those affected have raised fears that it may now default.

On Wednesday, investment bank JPMorgan called the slump in Pakistan's bonds to just a third of their face value justified.

"Pakistan's debt and fiscal dynamics flag rising solvency concerns," JPMorgan's analysts wrote in a note.

"Political/fiscal, flood-related external risks, and possibility of a debt moratorium – and their implications on the IMF programme as well as FX liquidity – likely justify current sovereign bond prices."

JPMorgan says Pakistan's troubles justify slump in bond prices

‘No need to get nervous’

At the event, the federal finance minister said “it is imperative that the modern day government is able to benefit from technology and leverage it to realise economic gains and ensure that they are allocated efficiently and effectively amongst the largest possible group of people”.

He said that a good governance strategy in the 21st century needs to carefully navigate between the opposing objectives of climate change, environmental sustainability and adoption of technology.

“We have to consider adopting technology which could place us amongst the developed, industrialized economies of the world, while ensuring that our economic models are inclusive and factor in the cost of such advances to the environment and the society at large,” said Dar.

The finance minister said that back in 2013, Pakistan was globally declared a “macroeconomic unstable country, and was predicted to default in six to seven months’ time”.

However, the incoming government of Pakistan Muslim League-Nawaz (PML-N) managed to present a budget, and within a month of budget approval, the then government signed the International Monetary Fund (IMF) agreement.

“Within three years, the world was acknowledging Pakistan’s progress on the economic front. Thus by FY17, we had an inflation rate of 4%, a stable currency at 104 against the US dollar, whereas our foreign exchange reserves stood at $24 billion, while our growth rate stood near 6%,” said the finance minister.

Dar said that the country is again facing macroeconomic challenges “left, right and centre”. He said that the incumbent government was facing “very serious challenges” including a potential default, which was averted “but at a very high political cost”.

“However, the recent flood catastrophe has created multiple challenges for Pakistan,” he said.

The finance minister reiterated that Pakistan will not approach the Paris Club for rescheduling of its loans.

“I had said to the prime minister that this would not be the right thing, as it would not send a good signal. We should be able to deal with our liabilities and responsibilities without going to the Paris Club,” he said.

Dar also dismissed speculations that Pakistan would ask for an extension in the maturity date of the bond. The finance minister said that bonds of $1 billion are maturing in December.

'IMF commitments to be honoured'

On renegotiating the IMF programme, Dar said that the sovereign commitments must be honoured. “The current programme should have ended by now,” he added.

Dar said that during his previous tenure, Pakistan completed its IMF programme successfully in 2016.

“Pakistan’s funding needs for the ongoing fiscal year stand at $32-34 billion. This includes multilateral liabilities worth $22 billion, while the current account deficit is estimated at $12 billion, which can be achieved as we did in FY2016-17,” he said.

“I want to give a message to the markets that there is no need to get nervous, we are back in business and we will arrange everything. Nothing is to worry as Pakistan will not default,” said Dar.

“Things will improve,” he said.

He said the high inflation rate is due to incompetency of the previous government. “We need to bring down the inflation rate, stabilise the rupee, build foreign exchange reserves and improve the GDP growth,” said Dar.

On the country’s flood situation, Dar said that a high-level roundtable discussion on how to respond to the impacts of the catastrophic floods in Pakistan was held during his trip to the US.

“The roundtable estimated flood losses to the tune of $32.4 billion, we have to work around this as this is our national duty,” he said.

“Let me assure that the government is dealing with this as a top priority. We would welcome the generous support of the world community,” he added.

Earlier in the day, the finance minister expressed hope of a positive result from meetings with the International Monetary Fund (IMF), World Bank, and other multilateral creditors, as Pakistan seeks support after devastating floods exacerbated the South Asian nation’s economic crisis.