Pakistan plans to launch $1bn bond, get $4bn foreign bank loans

ISLAMABAD: The 2024-25 budget-makers plan to launch an international Eurobond of over $1 billion and make a fresh bid to fetch around $4 billion for securing foreign commercial bank loans. According to the Budget 2024-25 documents, the government did not project any amount in shape of Saudi oil facility in the next fiscal year.Pakistan had requested the Saudi government for resuming the oil facility but now all hopes have dashed to the ground in this regard.

The government projected to secure foreign commercial bank loans to the tune of $4 billion in the outgoing fiscal year but failed in luring foreign commercial loans keeping in view its deteriorated credit ratings.

After the IMF deal under the SBA program of nine months, there were expectations of some improvement in the credit ratings but it was not so, the dream of getting commercial foreign loans could not be fulfilled. Now the government is hoping to secure foreign commercial loans during the FY2024-25.

The budget-makers finalised projections to secure dollar inflows of $20 to $23 billion including rollover, commercial refinancing and securing loans from multilateral and bilateral creditors.

The 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 bond worth of over $500 million. However, despite making projection for the outgoing fiscal year to fetch $1.5 billion through launching of international bonds, the country’s economic managers could not get any foreign inflows in the shape of international bonds for the current fiscal year 2023-24 mainly because of higher interest rates in the international markets and secondly the poor credit ratings of the country.

The exchange rate 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 foreign inflows could not be ensured in a timely manner.

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.

Although, Pakistan is expecting a bailout package from the IMF for balance of payment support, there are no expectations that the Fund would help out the country by providing budgetary support in the next fiscal year 2024-25.