Planned bonds likely to receive positive response after IMF’s nod

KARACHI: Pakistan is likely to get a raving response in overseas debt market and the planned Eurobonds would let it have up to three billion dollars as an economic health certificate from the IMF in shape of a $6 billion loan program has piqued appetite of foreign investors, analysts said on Saturday.

Topline Securities Chief Executive Officer Mohammad Sohail said Eurobonds should be issued as Pakistan entered into the International Monetary Fund (IMF) program.

“There is an appetite in the market,” Sohail said. “Up to three billion dollars could be raised.”

The government shelved a plan to issue dollar-denominated bonds last year on prospects of higher yields.

“It has yet to start process for hiring advisers,” an analyst close to the finance ministry said. “The plan (to issue bonds) is still intact.”

The country entered into a $6 billion IMF loan program last week to avert balance of payment crisis. It also took funds from bilateral sources, including China, Saudi Arab and UAE.

While the foreign inflows helped the country support depleting foreign exchange reserves, the country would still need $19 billion to meet its external financing requirements during the current fiscal year of 2019/20.

Pakistan didn’t issue foreign bonds after November 2017 when the country raised $1 billion in five years sukuk and $1.5 billion in 10 years Eurobond on lower yields.

Sohail said the US Eurobond yields are falling, which has a spillover impact across the board. The yields of Pakistani Eurobonds are also decreasing, he added.

Rupee slump led to decrease in Pakistan’s Eurobonds. The rupee has lost half of its value against the US dollar since earlier last year.

An analyst is, however, skeptic over the response of foreign investors to low yields. “(Ratings agency) Moody’s termed Pakistan’s as junk bond. Since it is high risk bond that investors would gravitate towards the float is to be seen.”

Another analyst agreed that all depends on yields to be offered.

“It may be right time for Pakistan to enter into the overseas debt market,” the analyst said. “Higher yields as were offered in 2014 float drew widespread criticism.”

Sohail, however, said there is an importance of such bonds at this time as a sukuk bond worth one billion dollar is to be matured later this year, while another one of a billion dollar has already been matured earlier this year.

“The government should aggressively step up efforts to appoint advisers,” he added. “The process should take two months at least.”

The IMF is optimistic about Pakistan’s bonds floats to get good response with foreign investors betting on the current direction of the country’s economy aided by the Fund. But, the creditor said the decision is up to the discretion of the authorities.