ISLAMABAD: Pakistan plans to float $1-1.5 billion in overdue Euro bonds within two months in order to beef up foreign exchange reserves.
On Wednesday, finance ministry spokesman Kamran Ali Afzal told reporters that bids to name a lead manager for the Eurobond problem had been invited from 10 leading foreign banks.Bonds The bids were opened on Tuesday and among the bidders were all the conventional top rank banks, he added, adding.
He said the bids would be reviewed in the coming days and the floatation of the bond was scheduled for the end of December / early January after the appointment of the lead manager / financial advisor. He said the Eurobond target was around $1bn, but the exact size would depend on the bidding and could go up.
In response to a query, Mr. Afzal claimed that the introduction of the foreign sukuk was also part of the funding schedule for the current fiscal year, but that the dates had not yet been set.
The previous 10-year Pakistan foreign bond was currently trading at about 9.89pc, up from about 8pc in May this year against the State Bank of Pakistan’s 7pc policy rate and inflation rate at about 8.9pc.
Moody’s credit rating for Pakistan currently stands at B3 with a positive outlook, while Standard & Poor’s and Fitch rate the country with a stable outlook at B(negative).
In response to another issue, the Commission on Pay and Pension, headed by former Secretary Nargis Sethi, was expected to complete its recommendations for inclusion in the budget for the next year within six months. He claimed that it was very clear that the terms and conditions of former government workers could not be amended and that their pension plans would also remain intact, so that any contribution arrangements for prospective employees would have to be set in place.
Approximately $ 1.5 billion worth of Eurobonds were part of the finance programme of the last fiscal year but were postponed due to unfavourable market circumstances resulting from some arbitration proceedings and the larger attention of the government on simpler hot money choices involving up to 13.25pc mark up that later evaporated.
Some breathing room was also generated after the IMF supported around $1.4 billion in Rapid Financing Instrument (RFI) following the Covid-19 pandemic, debt relief from G-20 countries as part of assistance to developing nations, and early disbursements by the World Bank, Asian Development Bank, and Asian Infrastructure Investment Bank of some programme and project loans.
For the current fiscal year, in order to satisfy external debt commitments and retain foreign exchange reserves above a certain amount, the government is again looking at international borrowing by sovereign bonds.
For 5-10 years, the foreign exchange earned by international bonds is usually repayable. Alternate plans were in place to cover up any planned outflows over the next few months, informed sources said.
In the first quarter of the current fiscal year, Pakistan’s fiscal deficit amounted to 1.1% of GDP, nearly 0.4% more than in the same time last year, due to lower receipts and higher spending.