Tuesday November 29, 2022

Pakistan hires banks for international bond sale

By Our Correspondent
March 18, 2021

ISLAMABAD: The government has taken foreign banks on board to raise funds from a possible foreign-currency bond offering, people familiar with the matter told Bloomberg on Wednesday.

The government has mandated Deutsche Bank AG, JPMorgan Chase and Co, Credit Suisse Group AG, Standard Chartered Plc and Emirates NBD Bank PJSC, the people said, asking not to be identified because the details are private.

The expected size of dollar-denominated Eurobonds will be $750 million to $1 billion, sources told The News last month, adding the happening would be around this month. The plan replaced the previous intention of the government to go for asset-based financing, known as sukuk, in the international market. However, the federal cabinet was wary of an idea for keeping a state asset as a guarantee for debt, according to the sources.

Pakistan is looking to raise funds after reaching an agreement with the International Monetary Fund (IMF) on resumption of a $6 billion bailout program that was secured in 2019 to avoid bankruptcy.

IMF brought the three-year extended fund facility to a halt last year amid the coronavirus outbreak and that stopped the second review imperative to release the third tranche of around $450 million. The country received $991 million as the first installment soon after the EFF approval in July last year and following thickened uncertainty about the agreement surrounding in the air for a long time. The second tranche amounted to $452 million.

Pakistan is also separately planning to issue a $500 million green note in the next few months to help boost its development of hydroelectric power. This will be the first such foreign bond to help the government achieve its ambition of increasing share of renewable energy to 20 percent by 2025 and 30 percent by 2030.

There were no replies to requests for comment from the finance ministry secretary and media team. Muhammad Umar Zahid, director debt at the ministry of finance, said in a webinar last month that the country expected to raise more than $1.5 billion in global bonds if market conditions were conducive. It was setting up a medium-term note program that would keep it registered for 12 months instead of a single transaction, he said.

Borrowing costs in debt markets globally have jumped in recent weeks after a spike in rates fueled by rebounding economic activity around the world.

With robust inflows in shape of remittances and debts, Pakistan’s foreign exchange reserves have come back to a stable level and that also helped Pakistani rupee notch up to one year high level.