Pakistan to make $1 billion bond payments to avoid default risk

Pakistan to make $1 billion bond payments to avoid default risk

Even as worries over its ability to pay its long-term debt remains, Pakistan is poised to pay a $1 billion bond on Friday and dodging the risk of a near-term default.

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The government plans to make the payments on the sukuk dollar bonds by December 5th, three days before its maturity, State Bank of Pakistan Governor Jameel Ahmad said at a briefing last week. The bonds recovered to 97.90 cents on the dollar, close to the par value of 100, after dropping to 81.86 cents in October.

While Pakistan is expected to meet its short-term debt obligations, its longer-term bonds are still trading at distressed levels, as investors worry about its ability to emerge from a crisis. In October, Moody s Investors Service and Fitch Ratings downgraded the nation deeper into junk after devastating floods have jeopardized its fiscal health.

The negotiations with the International Monetary Fund for the next tranche of $600 million have been postponed as the nation evaluates how much the rebuilding will cost. In the year started July, Pakistan needs to repay around $25 billion, though most of it has been paid or rolled over, Jameel said.