Fitch Ratings- Hong Kong, an international sovereign rating agency, which is conducting Pakistan’s sovereign rating review exercise, has sought Pakistan’s viewpoints on China’s future role in bilateral financing.
The rating agency has sought answers to over two dozen questions from different line Ministries to finalise its rating review exercise.
The questions raised with Ministries are as follows: (i) Ministry of Finance – what is the estimate for economic growth in FY 2021 and forecast for FY 22?. How will the most recent wave of the Coronavirus impact growth outlook? What do you view as the biggest non-Coronavirus risks to the growth outlook? What is your outlook for the current account deficit? A strong pick-up in imports has driven a widening of the trade deficit, despite recent export growth. What is driving the strong acceleration in import growth and does this pose potential risk for external finances? Remittances have so far helped offset the rising trade deficit. What led to the sharp rise in remittances despite global pandemic shock? Do you expect the high level of remittances to be sustained?
For budget wing the following questions were posed: could you provide an update on your fiscal estimates for the full FY 21? What are we likely to see in terms of budget targets in the upcoming FY 22 budget? Is the government planning additional fiscal support measures in response to current wave of the pandemic? How much is the virus resurgence likely to dampen revenue? What is the government’s current medium-term fiscal strategy?
Questions posed to Ministry of Finance External Finance (EF) Wing: How is the current sixth review of the IMF program progressing? Are there any potential areas of disagreement with the Fund? What are the prospects for the State Bank of Pakistan (SBP) and Nepra Acts being passed through parliament?
China has been a key source of bilateral financing, particularly as Saudi Arabia did not roll over its deposits at the SBP. What role do you expect China to play going forward?
Debt Office: Please provide an outline of external debt servicing amortization and interest payments over the coming years. Are there concrete plans to request additional funding under the Rapid Financing Instrument (RFI)? What do you view as the key risks to meeting the external debt service obligations? Do you anticipate any issues with the rollover of short-term debt?
How do you evaluate the most recent bond issuance in terms of market demand and yields? Do you plan to tap international markets again this year? Any prospects for issuing of Panda bond or Sukuks?
DSSI has been extended another 6 months. How much do you estimate will be the savings for Pakistan over the final 6 months of Debt Service Suspension Initiative (DSSI)? What has been the total benefit for Pakistan in the first two rounds of DSSI?
Have there been discussions with bilateral creditors for more substantial debt relief / restructuring? Has Pakistan considered joining the G-20’s Common Framework?
Outline the government’s current debt management strategy. Is there sufficient access to financing from the domestic private sector given the higher deficits resulting from the Covid shock? How have recent issuances on domestic markets performed? What have been recent trends in non- resident participation in domestic government bond markets? How much additional external financing is required to meet budget financing needs?
Ministry of Health: How is the vaccine rollout progressing?
Power Division: What is the progress towards addressing circular debt, particularly regarding the power tariff adjustments?
Ministry of Commerce: What are the prospects for export growth over the next couple of years? What policies is the government taking to help support the export outlook?
BoI/CPEC Authority: What is the outlook for FDI and how does the government plan to attract more FDI inflows? What are the current plans with regard to CPEC related projects, as well as future infrastructure investment projects?
FBR: could you provide more details on the tax reforms and adjustments that are likely to be proposed as part of the FY 22 budget? How supportive will these measures be in boosting revenue collection over the medium-term? Are you concerned about any economic headwinds arising from the tax reforms as the economy emerges from the pandemic? Is the government planning additional fiscal support measures in response to current wave of the pandemic? How much virus resurgence is likely to dampen revenue?
