Budget 2024-25: Govt plans to launch $1.5 billion international bonds

ISLAMABAD: Pakistan is planning to launch international bonds, including Panda and Euro/Sukuk bonds, in the next budget for 2024-25 in a bid to fetch over $1.5 billion in the national kitty, it was learnt.

The budget-makers are finalising projections for the external resource receipts for the next budget 2024-25 but the final decision is yet to be made for re-entry into the international market.

Pakistani authorities are making fresh projections based on the possibility that Islamabad will be able to strike a fresh deal with the IMF under medium-term Extended Fund Facility (EFF) which will pave the way for improving credit ratings of the country in the first half (July-Dec) period of the next financial year. “The government is all set to launch the Panda bond in a bid to tap liquidity available in Chinese market with possibility to launch a bond of over $500 million,” said the official sources.

However, despite making projection for the outgoing fiscal year to fetch $1.5 billion through international bonds, the country’s economic managers have remained unable to fetch any foreign inflows in the shape of any international bonds in the current fiscal year 2023-24. This is mainly because of higher interest rates in the international markets and secondly the deteriorated credit ratings of the country, top official sources said while talking to The News here on Thursday.

The budget makers argued that the exchange might face pressures in case of inability of Islamabad’s economic managers to secure desired foreign inflows. The Real Effective Exchange Rate (REER) might face pressures if the foreign inflows could not be ensured in timely manner. The data shows that the exchange rate has been currently overvalued and abrupt adjustments could take place in rupee against dollar in case of failure for timely disbursement of dollar inflows.

Under the IMF program, the external financing would be one of the conditions to strike a fresh deal for securing bailout package of $6 billion Extended Fund Facility (EFF). Each and every penny would be counted for fulfilling the external financing needs of the country. The government is making the next budget for 2024-25 on the average exchange rate of Rs295 against US dollar.

Federal Minister for Finance Mohammad Aurangzeb had already shown his intention to tap the Chinese market for launching Panda bond but the credit ratings of the country did not improve in the outgoing fiscal year. With expectations of easing out monetary stance in international market especially in USA on eve of upcoming elections, there is possibility of reduction in policy rate, so the appetite for launching of Eurobond might witness an increase in the next financial year.

Secondly, the next IMF program of medium term would help Islamabad to restore confidence of international investors in Pakistan’s economy, so Islamabad might consider re-appearing on the radar screen of international bond market after a pause of few years.