Dwindling foreign reserves: Pakistan may launch $1 bn Eurobond

ISLAMABAD: In order to build up the foreign currency reserves, Pakistan will launch Eurobond to fetch $1 billion in the coming December/January of the current fiscal year.

“Yes, we have received bids from 10 international banks for selection of financial advisers to accomplish this transaction in the bond market. It will be accomplished in the coming December/January period. The government will decide whether it will float the Islamic denominated Sukuk bonds or not, keeping in view the advice of selected financial advisers,” the top official of the Finance Division confirmed to a select group of reporters here on Wednesday.

The Ministry of Finance's official spokesperson told the reporters on Wednesday that the process of launching the Eurobond had kick-startedand so far received 10 parties' bidding for selection of Financial Adviser (FA). “This upcoming Eurobond will be launched in December/January period of the current fiscal year,” he added. The spokesperson refused to share the names of 10 banks, citing confidentiality.

However, sources said that 10 banks which participated in the bidding for selection of Financial Adviser for launching the Eurobond included JP Morgan, Citibank, Bank of America, Standard Chartered, Deutsche Bank, Credit Suisse, Bank of China, Dubai Islamic Bank, Emirates NBD and Meezan Bank.

After getting an indication from Saudi Arabia that $2 billion deposit loan would have to be returned without further rollover, the sources said that the government had started exploring all available options to build up foreign currency reserves. Pakistan’s foreign currency reserves held by the State Bank of Pakistan (SBP) stood at $12.18 billion and after paying back the liabilities, it might further reduce. Islamabad has started managing foreign inflows from all possible avenues, including going back to the international market to launch an international bond and become visible on radar screen of international investors.

It will be the first international bond transaction that is going to be launched during the PTI led regime. The PTI leadership used to criticize launching of international bonds, especially where the assets were placed as guarantee. Some PTI ministers always extended staunch opposition when the Ministry of Finance tabled any such proposal before the ECC or the federal cabinet. Finally, the government granted a nod for launching an international bond after which the Ministry of Finance kept $1.5 billion inflows through launching of international bond in the documents of the current fiscal year’s budget for 2020-21.

There are apprehensions that without formal restoration of the IMF programme, it will not be viable to launch the Eurobond in international market. When contacted, former Economic Adviser and renowned economist Dr Ashfaque Hassan Khan said that all those elements were spreading such rumors who wanted to see Pakistan going into the clutches of IMF again. He cited various examples for proving that Pakistan launched the Eurobond in 2006-7 when the country was not under the IMF program. Pakistan can go into the international market and must narrate its story in such a way so that investors could be lured at minimum rate, he concluded.