Govt ought to repay $1bln on Eurobond maturity in May, June

ISLAMABAD: Pakistan needs to repay at least one billion dollars on account of its foreign debt liabilities during the upcoming May and June and so the government is exploring various options of borrowings to ensure the timely repayments without creating pressure on the country’s foreign exchange reserves, sources said on Tuesday. 

“Two major repayments on external fronts will be due in May and June 2017 – including $750 million on account of Eurobond and another $250 million within this period,” a source, privy to the development, told The News.

In 2007, Pakistan secured $750 million through a bond, whose maturity will be due on May 24. The country also raised another $300 million in 2006 for 30-years. The bond would be matured in 2036. Other debt obligations are related to Paris Club repayments and other multilateral and bilateral creditors. 

The sources said Pakistan, for the time being, dropped a proposal to issue a bond in Chinese currency, an idea which was floated several months back to diversify the foreign exchange reserves and keeping in view the ongoing China-Pakistan Economic Corridor (CPEC) projects.

“We may consider issuance of bond in China or Hong Kong in Chinese currency in the coming financial year as it will help us making repayments to China in its currency in years to come under the $51 billion-CPEC,” an official said.

Presently, three options exist in front of the economic managers: the issuance of another bond in the international market, borrowing from Chinese banks or let the foreign currency reserves depleted.

The officials said Pakistan could launch another international bond at the rate of more than five percent, which would be expensive. Another option, they said, is to get commercial borrowings from Chinese banks at the rate of two to three percent, which could save substantial amount. 

“It will not burden our debt liability as one Eurobond obligation will be repaid by getting another loan from Chinese banks. This loan swap will reduce our cost of borrowing,” said the official. Now, the economic managers are finding out solutions to repay the previous loan by getting fresh loan and without increasing debt liabilities.

“We will get borrowing in order to repay the previous loans so it will not increase our debt liability,” said the official. Economists said there is need to focus on dwindling exports and foreign direct investment and increasing remittances from abroad as repayments would continue to mount pressure on the external fronts.

“The government should immediately devise a plan to ensure increased numbers of workforce in Gulf and other regions, so the subdued growth in remittances can be avoided,” said the official.

Exports sector needs special attention of the incumbent regime as Pakistan’s made-ups could fetch foreign exchange from different parts of the world and could resolve the country’s problems on the external front, which are reemerging in the wake of widening current account deficit. 

Asian Development Bank forecast the current account deficit at 2.1 percent of GDP in FY17, less than what was projected (2.9 percent) by the International Monetary Fund. The deficit, however, widened to $4.7 billion in the July-Jan period of 2016/17, almost double the $2.5 billion in the corresponding period a year ago.