LAHORE: With the five-year billion-dollar international sukuk maturing on October 13, the government has yet to decide on the timing of issuing new dollar- or euro-denominated Sharia-compliant papers. obligations to raise new debts.
The government plans to purchase a total of $ 3.5 billion in debt through international bonds during the current fiscal year. Of that amount, it has already raised $ 1 billion in July through an on-tap issuance of its three-tranche Eurobond, which was issued in March to reach $ 2.5 billion. The issue was oversubscribed with Pakistan accepting $ 300 million for 5.875 percent five-year bonds, $ 400 million for 7.125 percent 10-year bonds and $ 300 million for 30-year papers at 8.450 percent.
$ 1 billion five-year international sukuk due 13
“We will certainly sell the planned international bonds. But we haven’t decided when we want to do it, ”Mohammad Umar Zahid, debt director at the federal finance ministry’s debt policy coordination office, told Dawn from Islamabad by telephone.
Pakistan’s external financing needs are increasing with increasing pressures on the current account and the rupee due to a rapidly growing trade imbalance on the backs of rapidly growing imports to meet domestic demand for raw materials, goods and services. equipment, energy and food. Although the government and the central bank have taken steps to curb imports, analysts argue that Islamabad will need more external debt financing than predicted for the fiscal year in order to meet its debt obligations. reimbursement in foreign currency, protect existing foreign exchange reserves and support the country. currency due to the slow increase in exports and the stagnation of remittances.
However, the suspension of the IMF program since March of this year due to differences between the government and the global lender over Islamabad’s pursuit of expansionary fiscal and monetary policies to stimulate growth, worries about the fallout from the insecurity of the country. Taliban-controlled Afghanistan, the deteriorating balance of payments position, and the country’s not-so-comfortable relationship with Washington would have made it difficult for Pakistan to issue new debt.
Given the difficult situation and the bleak mood of global fund managers, Wapda has already postponed plans to raise $ 500 million in debt on the international market through another green bond issue until. ‘in the next exercise. Wapda had paid off an equivalent amount of loans when the green bond was first issued in May.
“The success of the sale of the new Eurobond / Sukuk debt will depend on the progress of the forthcoming negotiations on the resumption of the IMF program. If the government manages to strike a deal with the lender, it will be easier to access the international market in the coming months. If negotiations persist, we may have to wait, ”Fahad Rauf, head of research at Ismail Iqbal Securities, told Dawn by phone from Karachi.
Analysts also agree that even if the government does manage to strike a deal with the IMF, it will have to pay a higher price on its new bond issue to attract investors due to the US monetary tightening, the Afghan situation and pressures on the economy. Pakistan current account. “I think we will have to pay 50-100bp more in interest rates on top of the price paid on July debt, even if we have the IMF on our side and investors choose to ignore the Afghan situation.” , Fahad said.
$ 7.8bn Eurobond / sukuk debt was 9pc of Pakistan’s total external lending of $ 86.4bn at the end of FY21, as about 48pc came from multilateral lending, 30pc from loans bilateral and 13pc of commercial loans. The report says the country’s $ 8.8 billion in dollar bonds have now fallen about 4% since mid-June.
Posted in Dawn, le 2 October 2021