Karachi/Washington (Newsdesk) Credit default swaps (CDS), a 5-year insurance contract that protects investors from default, rose sharply yesterday amid political turmoil and uncertainty over negotiations with the International Monetary Fund. has increased.
According to data provided by research firm Arif Habib Limited, CDS rose to 75.5 percent from 56.2 percent a day earlier. Official sources from Washington said talks between Pakistan and the IMF last week. The schedule was changed, but the negotiations are ongoing, however, media reports claimed that the negotiations, which were supposed to start in early November, have been postponed until the third week of this month.
According to reports, negotiations will resume after Pakistan fulfills its promise to adjust the sales tax on petroleum products, as well as other steps required under the loan agreement that was revived earlier this year, “Dawn”. Official sources who spoke to said that the talks were rescheduled after the release of the World Bank report on the damage caused by floods in Pakistan last month.
Pakistan has to pay one billion dollars on the maturity of 5-year sukuk or Islamic bonds on December 5. The finance minister has assured the payment of the sukuk amount several times but the global market is not ready to trust the assurances while the country’s economy is in markets. , is trying to avoid default by borrowing more from donors, commercial banks and friendly countries.
The rise in CDS on a daily basis indicates a dire situation, making it increasingly difficult for the government to raise foreign exchange from the markets through bonds or commercial loans to meet the country’s current fiscal obligations. 32 billion to 34 billion dollars required during the year Economists say that the country will need about 23 billion dollars during the current financial year.
Pakistan is still in the IMF program due to which it is receiving funds from the World Bank, Asian Development Bank and Asian Infrastructure Investment Bank. but the situation is getting worse due to the increase in the deficit in the first quarter.
The financial sector says that the IMF is calling for the imposition of new taxes to increase liquidity and avoid an increase in the fiscal deficit. can only be achieved by means of which is a difficult undertaking for the government amid the current poor economic situation, political unrest and instability.