Pakistan raises$2.5 billion by selling Sukuk, Eurobond in NY

ISLAMABAD: Pakistan on Wednesday raised US dollar denominated Sukuk and Eurobond worth $2.5 billion in New York against the total offered amounts from investors by $8 billion in order to stop depletion of foreign currency reserves.

“Pakistan raised $1 billion through five year Sukuk at rate of 5.625 percent and $1.5 billion with 10 year Eurobond maturity at rate of 6.875 percent,” Federal Secretary Finance Shahid Mehmood confirmed to The News from New York soon after finalising transactions on late Wednesday night.

Pakistan sells Sukuk bonds having tenure of five years at 5.625 percent rate of return. Islamabad sells 10-year Eurobonds amounting to 1.5 billion dollars. Pakistan sold Eurobonds at 6.875 percent rate of return. Pakistan received bids amounting to eight billion dollars from foreign financial institutions. The country last borrowed $1 billion in the global Sukuk market at 5.5 percent in October 2016. Islamabad also floated a 10-year Eurobond of $500 million at 8.25 percent in 2015. The government had arranged roadshows in Dubai, London, Boston and New York this week.

The government appointed a consortium of Standard Chartered Bank, Industrial and Commercial Bank of China, Citibank, Deutsche Bank, Dubai Islamic Bank and Noor Bank as lead managers for conducting the Sukuk transactions. It delegated Noor Bank to manage the Sukuk bonds in the Middle East.

Names of Standard Chartered Bank, Industrial and Commercial Bank of China, Citibank and Deutsche Bank have also been finalised for the Eurobond issue. US finance service firm Standard and Poor’s posed trust on the country’s repayment ability as well as its essential elements to underpin issuance of Islamic bond, backed by assets.

Pakistan’s foreign currency reserves stood at $19.7 billion in totality with SBP’s held reserves standing at $13.5 billion and reserves held by commercial bank mounting to $6.169 billion on November 17, 2017.

Alone in first four months, the reserves nosedived by $2.7 billion so the government would only bridge financing gap of $3 billion what they had already lost during the current fiscal year. The bond issuance will give some respite to the alarming balance of payment situation due to widening current account deficit. The current account deficit swelled to $12.439 billion, equivalent to four percent of GDP in FY-2017, much above 1.7 percent in FY-2016. The SBP projected current account deficit at 4 to 5 percent of GDP during the current fiscal year.