Finance Minister Miftah Ismail said on Friday that Pakistan is seeking debt relief from bilateral creditors, and not commercial bondholders, remarks that came after the country's bonds slumped to just half their face value.

In a text message to Bloomberg, the finance minister said country will repay on time its $1 billion sovereign bond due in December.

A large portion of debt is in the form of deposits from “friendly countries” who have promised to roll them over, he added.

“We are seeking debt relief from the Paris Club’s bilateral creditor countries, just as it was done during" the pandemic, Ismail was quoted as saying by Bloomberg. “We are not seeking, nor do we need to seek, any relief from our commercial bank debt nor from Eurobond debt.”

Later, the finance minister took to Twitter to reiterate the same.

All hell to break loose without debt relief: PM Shehbaz

The comments follow those made by Prime Minister Shehbaz Sharif who made an urgent appeal for debt relief from rich nations as catastrophic floods exacerbated by climate change displaced millions of citizens, added the report. Separately, the Financial Times cited a draft UN policy paper as saying that Pakistan should seek to suspend international debt repayments and restructure its loans.

Pakistan has $8 billion in Eurobond debt due by 2051, “which isn’t a burden,” Ismail added.

Paris Club repayments are $1.2 billion but that deferral will help Pakistan with reconstruction efforts following the devastating floods, he added.

Pakistan’s bonds slumped to just half of their face value on Friday after the Financial Times said that a United Nations development agency was urging the cash-strapped country to restructure its debt.

Pakistan default fears spike on report of UN debt suspension advice

“A memorandum the United Nations Development Programme (UNDP) is set to hand Pakistan’s government this week says that its creditors should consider debt relief in the wake of the floods,” according to the Financial Times.

During the interview given to Bloomberg on Friday, Prime Minister Shehbaz Sharif cautioned that all hell would break loose for Pakistan if debt relief was not granted to it.

Due to conditions of the IMF programme, Pakistan has to enhance tax on petrol and electricity every month “and now, we have additional responsibility to rehabilitate millions of shelter less people, rebuild their houses and provide them employment," he added.

“What the world has done is commendable but it is far from meeting the needs of the country,” he noted. “The government of Pakistan cannot do it alone. Our resources are insufficient and we need additional funds.”

“Unless the world comes out with billions of dollars in support for relief, rehabilitation and resilience, the economy cannot be placed back on track,” the PM said.

Pakistan has been reeling from devastating floods that put estimated losses at around $30 billion, fanning fears that Pakistan will not meet its debt obligations.

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