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September 10, 2017

National Savings mulls launching $500 million to $700 million dollar bond


September 10, 2017

ISLAMABAD: The Central Directorate of National Savings (CDNS) has proposed launching dollar denominated bond for attracting investment from millions of overseas Pakistanis to generate $500 to $700 million during the current fiscal year, it was learnt on Saturday.

The CDNS, a subsidiary of Finance Division, is preparing and firming up proposal to this effect where overseas Pakistanis having limit of $500 will be allowed to invest in dollar denominated bond. 

The government plans to attract at least $500 million to $700 million through this bond.

Keeping in view the yawning gap at external front, the idea of attracting eight to nine million overseas Pakistanis, especially in Middle East seems feasible, but the Finance Ministry high-ups argued that the CDNS would have to undertake a lot of spade work before making it sellable in the next six to nine months of fiscal year 2017-18.

“The CDNS high-ups have made first presentation before the Finance Ministry high-ups this week to float this idea which is at the nascent stage right now. The finance secretary has directed the CDNS team to further fine-tune this proposal to make it viable for the current fiscal year,” sources told The News.

The CDNS, according to their plan, has suggested the government to lure overseas Pakistanis living in Middle East, possessing savings in the range of $500 to $1,000 dollars, to invest into this dollar bond. There is a difference between upcoming Sukuk bond and CDNS dollar denominated bond, as the latter would make efforts to lure small investors working overseas and possessing meagre savings. “If we can offer them attractive rates on their savings, the CDNS idea can become viable,” said an official.

In the past during the era of former CDNS DG Zafar Shaikh, the idea of dollar denominated bond for infrastructure development was presented but it did not materialise.

Such bond was issued by different countries in the recent past so Pakistan could replicate their experience in order to lure potential investors. Since the CDNS does not possess any expertise for launching such dollar bond, it would be advised to go ahead with this idea for attracting overseas Pakistanis living in the Gulf region during the first leg, especially since any effort to lure Pakistanis living in US, Canada or European Union would be difficult due to stringent regulations.

The sources said rising trade deficit was the major cause of concern for the country’s ruling elite. The trade deficit witnessed peak and stood at $32 billion for the last fiscal year with exports at $20.448 billion and imports at $53.2 billion.

This mammoth surge in imports was witnessed at a time when oil prices decreased substantially and Pakistan got bonanza of around $13 to $17 billion in last one and half-year period. Trade deficit continued to rise to over $3.2 billion in July 2017 alone in the first month of the current fiscal year with exports of $1.63 billion and imports of $4.835 billion.

Subsequently, the current account deficit jumped up to over $2 billion for July 2017 mainly because of yawning trade deficit. This made fixing the trade imbalance imperative to avert the looming crisis on the external front.

The government is planning to unveil a scheme to attract remittances from abroad. Pakistan’s nationalised and commercial banks would be incentivised to establish joint ventures with branches of international banks at selected destinations to lure Pakistanis living abroad to send money through official banking channels. The government also intends to launch Sukuk bond to attract $1 billion in first half of November this year.


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