Pakistan to pay $517.81mln against Eurobond on March 31

KARACHI: Pakistan will defray $517.81 million this month on account of a 10-year Eurobond, the first major foreign debt maturity in a year of heavy payments that will likely to stretch nation’s coffer.

“The 10-year Eurobond of $500 million is maturing on March 31. Total payments, including interest and principal, of $517.81 million will be made,” a spokesman of the State Bank of Pakistan (SBP) confirmed to The News on Friday.

The government of Pakistan issued the instrument on March 30, 2006 at 7.125 percent.

In September last year, the country issued a new foreign currency dominated bond of $500 million with a maturity of 10 years at a coupon rate of 8.25 percent. The country returned to the global capital market in April 14, after the gap of seven years, with the sale of $2 billion in sovereign 5 years and 10 years eurobonds that carried the interest rates of 7.75 percent and 8.25 percent respectively. 

An official document said the last interest payment would be made on the date of maturity. The government had already made interest payments semi-annually (on March 30 and September 30) during the 10-year tenor.

An aggregate interest payment on the bond comes at approximately $356.25 million. The total debt cost, including principal and interest against the bond, will be around $856.25 million.

According to Bloomberg data, Pakistan’s 40 percent, or $45 billion, of outstanding debt – both local and foreign – is due to mature during the current year. Around Rs4.3 trillion of debt is in local currency, while the county has to pay four billion dollars to its foreign lenders.

Analysts said the SBP is making the latest payment at the time when the country’s debt liabilities and repayments are being dubbed as a major drain on the foreign reserves. 

They said Pakistan has already spent a significant amount on servicing current loans and debts and can’t afford these costs to rise.

The analysts also said that a total of Rs2.4 trillion of Pakistan’s debt was estimated to be matured between July and September. They added that the spread between Pakistan’s 10-year sovereign bond and similar-maturity U.S. Treasuries hit a one-year high earlier this month.  They said the inflows of scheduled loans will improve the external position but non-debt inflows, such as exports and foreign direct investment, will remain a challenge for the country.

An analyst feared that Pakistan’s foreign reserves would likely to come under pressure in months ahead as anemic Middle East economies may suppress inflows of remittances into the country.

“Pakistan is not a direct victim of the oil shock but its spillover may mar the remittances-dependent economy,” the analyst said, “as GCC (Gulf Cooperation Council) countries are the major source of remittances for Pakistan.”

The SBP, however, said Pakistan is comfortable with the inflows from external sources. “IMF (International Monetary Fund) disbursement under the extended fund facility, amounting to around $500 million, (is) expected before March-end,” it said. “In addition, government of Pakistan’s inflows, which usually increase towards the quarter end, are likely to add to the SBP’ foreign exchange reserves.”  The SBP’s reserves stood at $15.63 billion in the week ended March 18, down $229 million from $15.86 billion in the preceding week.