Pakistan has informed the US about its decision to buy oil from Russia but only at terms that are favourable than offered to its arch-rival India, said Finance Minister Ishaq Dar on Wednesday.
Dar, in his first public event after returning from Washington, also ruled out seeking any relief from the International Monetary Fund and “begging” from other countries for aid for the flood victims. But he assured the markets that there was no need to panic and foreign exchange reserves will soon be up.
“The government has been actively pursuing the policy of purchasing cheaper oil from Russia and I have sounded the Americans about our decision during a meeting with the US officials,” said Dar while speaking to media after the All Pakistan Chartered Accountants Conference 2022. The conference was arranged by the Institute of Chartered Accounts of Pakistan.
The minister informed the US about Pakistan’s decision during a meeting with Ramin Toloui, the Assistant Secretary for the Bureau of Economic and Business Affairs and Donald Lu, Assistant Secretary for South and Central Asia Bureau of the State Department.
The statement is in line with Pakistan’s open support for Saudi Arabia’s decision to cut oil production, although the 2% reduction in the crude oil output could spike the oil prices that in turn will hurt Pakistan’s weak external sector position.
The finance minister said that if India could benefit from buying the Russian oil, Pakistan might as well. “We will not ink a deal on terms that are worse than India’s,” said Dar.
India has emerged as Moscow’s second-largest oil customer after China, which is now buying Russian oil at a significant discount.
Dar also said that Pakistan did not ask for any relief from the IMF during his last week visit to Washington, nor it has a plan to do so.
“The sovereign commitments must be honoured and there should not be a change of plan with the change of guard,” he added while referring to the ouster of Miftah Ismail. He said that Pakistan would complete the IMF programme by June next year.
Dar’s statement came amid international lenders’ push to Pakistan to implement the reform agenda agreed with the IMF and the World Bank in addition to let the rupee regime stay flexible.
The minister again maintained that the rupee was still undervalued and it would soon recover to below Rs200 per dollar, which is “its real value” under the inflation-adjusted formula. The minister charged that [some] banks started playing with the rupee again, abandoning their positive role in letting the rupee regain its lost value.
“I assure you that we have ample foreign exchange reserves and they will not pose a problem for the country,” 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.”
The minister said that the markets were panicked due to a drop in the foreign exchange reserves but added that there was no need to worry as the country had passed the phase of any possibility of default.
“Pakistan’s funding needs for the ongoing fiscal year stand at $32 billion to $34 billion, which can be achieved as we did in FY2016-17,” he said.
The finance minister said that he had shared a plan with Prime Minister Shehbaz Sharif about arranging the required financial resources.
Dar confirmed that the World Bank-led Post Damage and Need Assessment report has initially estimated the flood losses to the tune of $32.4 billion. The Express Tribune had reported last week that the estimated amount would be over $32 billion, including $19 billion economic losses.
The minister said Pakistan would not be begging from any country for aid but it “would welcome the generous support of the world community”.
The minister reiterated that Pakistan will not approach the Paris Club for rescheduling of its loans. “I told 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 were maturing in December.