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Ishaq Dar announces relief to the business community

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Finance Minister Ishaq Dar announced on Sunday that delayed payments of letters of credit (LCs) worth $50,000 will be processed this week in an effort to bring relief to the business community.

Dar told a press conference that the decision to grant relief came after consultations with State Bank of Pakistan (SBP) Governor Jameel Ahmed.

The finance minister stated that the SBP chief will pass on these orders to clear LCs as a “first step” towards growth next month, before departing for Washington to meet with officials from the International Monetary Fund (IMF).

He stated that a total of 7,952 applications were pending, and that following these decisions, roughly 4,400 requests for opening LCs — a payment mechanism used in international trade to give an economic guarantee from a creditworthy bank to a goods exporter — will be deducted.

Previously, the SBP required prior approval before opening LCs or registering contracts for specific sorts of imports including vehicles (CKD), telephones, and some types of machinery. These instructions, however, were provided on May 20, not today.

Dar’s response on Moody’s latest rating

Regarding Moody’s decision to downgrade the Government of Pakistan’s local and foreign currency issuer and senior unsecured debt ratings to Caa1 from B3, Dar said the ministry has submitted a detailed reply to the report and has addressed all reservations highlighted by the rating agency.

“The major reason behind this negative outlook was the speculations that Pakistan was planning to seek help from bilateral Paris Club creditors,” he said, adding that Moody’s thought that Islamabad was aiming to get its loans from World Bank and the Asian Development Bank, etc., rescheduled.

Read more: Finance Minister Ishaq Dar warns Moody’s of consequences after downgrade

The finance chief reiterated that after consultations with Prime Minister Shehbaz Sharif, it has been decided that Pakistan will not seek assistance from the Paris Club.

Dar further assured the markets that Pakistan’s next big payment — $1 billion in international bonds — which is due in December, would “absolutely be met on time.”

Meanwhile, the conditions agreed with the International Monetary Fund (IMF) will also be fulfilled.