By Hamza Ameer

Islamabad, Oct 11 (IANS): Pakistan is planning to engage with bilateral creditors and seek debt rescheduling, putting forward the financial challenges that the country is faced in the wake of the devastating floods, coupled with the looming health outbreak, say sources in the Ministry of Finance.

Pakistan Finance Minister Ishaq Dar has also stated that he will be putting forward the proposal of debt rescheduling, which, he said, will be coupled with timely payments to commercial and Paris Club lenders, to maintain a balance between growing financial needs and maintaining creditworthiness.

"We are okay with the bilateral debt rescheduling," he said.

"We hope to bring back economic normalcy in the next six months and then look towards venturing into the international capital markets," Dar added.

Pakistan has about $97 billion in external debts, of which, bilateral debts make up to $20.3 billion. And as per plans of the Finance Ministry, if bilateral creditors agree to roll over their respective debt, Pakistan may get a small breathing space of about $2 billion in the current financial year.

Pakistan's efforts will be inclined towards China as out of the $20.3 billion in bilateral debt, China's debts amount up to about $9.7 billion, which is 48 per cent of the total principal debt amount.

The move will come after Islamabad was advised to seek rescheduling of external debts from China by western creditors.

However, the Finance Minster believes that if the government can arrange $34 billion, then it can certainly raise another $1.2 billion, an amount due to be paid to Paris Club in the current financial year.

On the other hand, the International Monetary Fund (IMF) has estimated Pakistan's financial needs at about $40 billion.

"The cost of Paris Club debt rescheduling is more than its benefits," Dar stated.

However, Moody's credit rating agency has recently downgraded the country's rating from CAA1, making Pakistan's public debt highly risky.

But Dar seems optimistic that the government had already got a plan to raise debt through Eurobonds, adding that he would go to the capital markets only when economic fundamentals are strong.