JP Morgan Says Pakistan Will Not Default on its Payments

JP Morgan has put substantial weight behind Pakistan’s economy and says the South Asian nation will not default on its payments. According to the financial services company’s Asia Pacific Emerging Markets Research circular on ‘”Sovereign Special Situations”, it expects that the PKSTAN 5.626 percent December 2022 bond, at 90 offer, will likely get paid. The circular said that Pakistan’s sovereign credit is under renewed pressure as bond yields surge to levels last seen during the Global Financial Crisis of 2007-2008. Renewed calls for early general elections following the Punjab state assembly by-election will likely add to political uncertainty with important implications for the government’s willingness to implement electorally challenging policies likely required to resume and maintain the International Monetary Fund’s (IMF) bailout program. The developments have overshadowed the slow but still positive progress with regards to getting the IMF Extended Fund Facility (EFF) program back on track, it said. Market research suggests that bonds presently trading at 90 offer on par value are also among the lowest cash price Emerging Markets (EM) sovereign USD bonds with maturities of less than a year. “We remain MW PKSTAN with a negative bias despite the continuous sharp sell-off in recent months. However, we reiterate that the PKSTAN 5.626 percent December 2022 bond, at 90 offer, will likely get paid,” it said. Around midday, Finance Minister Miftah Ismail shared this development on Twitter. He tweeted, “With austerity and reform measures taken in the budget and since the budget, the IMF agreement and progress with other multilateral institutions, our bonds are a safe and smart investment”.