Govt plans to raise another $1.5bln through international bonds

ISLAMABAD: Government planned to launch another international bond to raise $1 to $1.5 billion till the end of the current fiscal year of 2017/18, officials said on Thursday – indicating its commitment not to knock at the IMF’s door to address anemic external account position.

“We will be considering launching another bond if need arises in the last quarter of the ongoing financial year,” a senior official of the Finance Division confirmed to The News.

“We have finalised our plan for continuously pouring dollar inflows in order to meet yawning financing gap on external front.”

Late last month, Pakistan raised US dollar denominated sukuk and Eurobond worth $2.5 billion in New York against the total offered amounts from investors by $8 billion in order to stop depletion of foreign currency reserves, which amounted to $19.7 billion till November 17.

Current account deficit almost doubled to $6.430 billion in the first five months of FY2018.

The official said government has prepared alternate plans to fill financing gap on external front “so dollar inflows from all possible avenues will be explored in order to avoid deep crisis during the upcoming few months”.

“We will have to notify 45 days prior to launching of bond and we are considering going ahead for new international paper after March 2018,” the official added.

But, the official said it was not yet decided whether it would be sukuk or Eurobond as the decision would be made after identifying market appetite just ahead of the potential issuance.

Various estimates said government has raised $6.5 billion through issuance of sukuks and Eurobonds during the past four years.

All the steps taken as yet by the government to check current account deficit remained ineffective. The government unveiled incentive package to boost exports and put up tariff and non-tariff barriers to discourage imports.

Though exports grew eight percent in July-November, imports recorded a double digit growth.

Officials conceded that the regulatory regime to enforce tariff and non-tariff barriers was so weak that anyone could get no objection certificate by spending a few thousand rupees. There is need to bring about paradigm shift to enforce quality standards in order to slash import bill.

The officials said buying houses that used to purchase goods from Pakistan have been shifted to Bombay and New Delhi from Dubai and Singapore.

They said Pakistan’s foreign trade missions have to play a key role to pursue buying houses’ parent companies in US, Europe and other parts of the world and start vigorous export promotion campaign to promote local made-ups in the international market.

“If substantial steps are not taken by both the government and exporters, serious crisis will be emerging on the economic horizon,” another official said.

The official said the government and State Bank of Pakistan met a major demand of exporters of exchange rate’s upward adjustments in order to make their products competitive in international markets.

Nonetheless, economists warned that external debt and liabilities are escalating and might cross the $90 billion mark by the end of the current fiscal year. They advised the government to refrain from obtaining loans “in haste and without undertaking proper homework” to curtail cost of repayment.