KARACHI: Habib Bank Ltd CEO Muhammad Aurangzeb said on Saturday Pakistan shouldn’t seek relief on commercial debt after the devastation caused by the nationwide floods.

Speaking at a conference organised by the Marketing Association of Pakistan, Mr Aurangzeb said failing to deliver on roughly $9-10 billion of commercial debt will knock the country out of the international capital markets.

“We mustn’t touch commercial debt, which makes perfect sense at this point in time in the global context,” he said.

Commercial debt consists of funds the sovereign has borrowed from commercial banks or international bondholders. These are different from the loans that Islamabad has acquired from bilateral and multilateral sources like foreign governments and international financial institutions.

“Our external debt is $130bn. About 80pc of it is bilateral and multilateral,” he said.

According to the State Bank of Pakistan (SBP), the country’s total external debt amounted to $130.2bn at the end of 2021-22. Commercial loans of just a little over $10bn constitute 7.7pc of the country’s total dollar-denominated external debt.

“There’s good stuff coming out of Islamabad. We’re steady with the IMF programme. We’re going to focus on bilats [bilateral] in terms of how we’re going to do our debt re-profiling,” said the CEO of Pakistan’s largest commercial bank with assets of over Rs4.3 trillion.

Mr Aurangzeb urged the government not to chase after “deposits from friendly countries” — a recurring practice involving the shoring up of central bank reserves with funds obtained from countries like Saudi Arabia and the United Arab Emirates.

“All this repo discussion, it’s not gonna happen,” he said while referring to a reserve build-up plan championed by former finance minister Miftah Ismail.

Under the proposed plan, which has apparently been shelved now, a friendly country was to acquire 10-15pc shareholding in state-owned companies with tradeable shares on the stock exchange. The transaction was to take place under a buyback agreement, which would give Islamabad the option — but not the obligation — to repurchase the same shareholding after a certain period of time at a 5pc higher rate.

“Let’s just forget about it. We’re in a world where people are talking about hard-core investments. Give them equity investments, give them board seats, that’s how the investment is going to come in,” he said.

Mr Aurangzeb said his takeaway from the recent IMF and World Bank meetings held in Washington DC last week was that Pakistan wasn’t the only country that was seeking relief from the global lenders.

“There’s donor fatigue and then there’s the issue of multilaterals’ bandwidth. My thought process coming out of those meetings was that we have to get our story together,” he said while urging the stakeholders to present a “credible story for where Pakistan is” at least in terms of the dollar amounts needed for post-floods rehabilitation.

“We should speak with one voice as to what we need,” he said.

Published in Dawn, October 23th, 2022