ISLAMABAD: Pakistan will have to pay back over $1.129 billion next week on maturity of five year international bond at a time when the country’s net international reserves had already fallen into negative, The News has learnt.
Islamabad will have to make heavy repayments of over $3 billion in last quarter (April-June) period of the current fiscal 2018-19 with $1 billion in each month and the largest lump sum due amount of over $1 billion on account of maturity of international bond would become due next week.
“We will have to pay over $3 billion in last quarter of the current fiscal as principle and mark up on foreign loans and bonds,” said a top official while showing official record of repayments for remaining period of the ongoing fiscal here on Saturday.
Pakistan had launched $2 billion bond on April 9, 2014 during the tenure of the PML-N out of which $1 billion was generated on five-year note at a yield of 7.25 percent and another $1 billion for a period of 10 years at the rate of 8.25 percent. Now the maturity of five years bond of $1 billion would become due next week on April 9, 2019.
However, in the aftermath of receiving generous support from friendly countries to the tune of $9.1 billion including $3 billion from Saudi Arabia, $2 billion from UAE and $4.1 billion from China during the first nine months of the current fiscal year, the foreign reserves held by State Bank of Pakistan (SBP) stood at $10.4 billion only. After excluding all kinds of liabilities and swaps, the foreign reserves held by the SBP had fallen into negative.
On other hand, the dollar inflows through traditional international lenders is also shrinking as the government could only manage $2.94 billion from all multilateral, bilateral creditors and commercial lenders in shape of loans and grants during the first eight months (July-Feb) period of the current fiscal year 2018-19 against $7.608 billion in the same period of the last fiscal under the PML-N led regime.
So far in the ongoing fiscal year 2018-19, Islamabad did not generate any penny through issuance of international bonds while the government raised only $499.44 million in shape of commercial borrowings so reliance on this avenue got reduced by the incumbent regime.
The government could not launch any international bond because Pakistan was not under the IMF programme and there was no story on the economic front that could be narrated to apprise international investors and second reason was reduced appetite in international market for raising funding for emerging markets.
“Yes a bond payment of $1 billion is due in first half of April. Adequate new financing has already been arranged for April to smoothly ensure this payment. Thus the payment will not cause any unusual pressure on FX reserves,” said Dr Khaqan Najeeb Advisor and spokesperson Ministry of Finance.
The government continues to follow a multipronged strategy to ensure continued stability in the country’s balance of payment (BOP) position. The strategy includes attracting more remittances and foreign direct investment, sale of assets and bilateral and multilateral flows, said Dr Khaqan Najeeb. The government has also launched Pakistan Banao certificate, a first ever retail offering to Pakistanis abroad. The government is also working on diversifying its investor base through issuance of a Panda bond. In addition to arranging adequate new commercial and medium term financing, bringing down the current account deficit is a key component of the strategy of BOP management, said Dr Khaqan Najeeb.
