Pakistan eyes another $2-3bln via international bonds

ISLAMABAD: Pakistan is tapping the global bond market to raise $2 to 3 billion just three months after raising $2.5 billion through Eurobonds that remained oversubscribed because of attractive yields, officials said on Tuesday.

“Keeping in view appetite of international market and offered rates, the government will go for maximum amount ranging from $2 to $3 billion in one go,” a top official said, requesting anonymity.

The government decided to tap more dollar inflows on its already launched Eurobonds by offering international investors with instruments of 5-, 10- and 30-year tenors. It’s expected to generate multi-billion dollars through this transaction.

Bloomberg reported that borrowers around the world rush to lock in funds before financing costs rise. The settlement date is scheduled on July 13.

Pakistan has budgeted to generate $3.5 billion through international bonds during the current fiscal year. The federal cabinet approved launching of both Eurobond and Sukuk bond for generating $3.5 billion during the current fiscal year.

In April, Pakistan raised $2.5 billion through a multi-tranche transaction of dollar-denominated Eurobonds as it entered the international capital market after a gap of over three years.

The conventional bonds were oversubscribed almost two times with estimated prices of 6 percent for five-year, 7.375 percent for 10-year and 8.875 percent for 30-year bonds.

Currently, Pakistan dollar-denominated bond with maturity in 2027 yields around 5.9 percent in the secondary market. The average yield over the last 3-month for the same is around 5.8 percent. In last issue of November 2017, Pakistan raised $2.5 billion by offering 5-year sukuk of $1 billion and 10-year Eurobond of $1.5 billion at 5.625 percent and 6.875 percent, respectively.

With robust inflows of foreign debts, Pakistan’s external imbalances have improved significantly. The current account deficit fell to 1.1 percent of GDP in FY2020 and turned into a surplus of 0.4 percent of GDP in the first half of FY2021, according to the International Monetary Fund’s (IMF) country report. IMF forecast the current account deficit to widen to 1.5 percent of GDP during the last fiscal year of 2020/21.

In March, IMF completed the second through fifth reviews of the extended arrangement under the $6 billion extended fund facility for Pakistan. The decision allowed for an immediate disbursement of about $500 million, bringing total purchases for budget support under the arrangement to about $2 billion. Since then, the program is on halt till September. The country may request to combine sixth and seventh reviews under $6 billion extended fund facility, according to sources.