Pakistan eyeing to raise another $2.5 billion through bond sale

Not considering going back to the IMF but considering issuing Chinese currency bonds: Miftah. Meanwhile junior finance minister says Islamabad studying all options as Pakistan’s foreign reserves have dwindled in past year.


ISLAMABAD: Pakistan’s State Minister for Finance Rana Afzal Khan said the government may raise the “same” amount of funds from global debt markets as it did at a $2.5 billion sale in November.

A final decision has not been taken yet and the government is studying all options, Khan said in an interview on the sidelines of a conference in the capital, Islamabad, on Tuesday. Pakistan aims to issue bonds or Islamic-compliant sukuk before elections in July as it looks to boost dwindling foreign-exchange reserves and continues to invest in infrastructure projects, Khan said last month in Karachi.

Pakistan last issued dollar debt four months ago to shore up its deteriorating finances. The country has been hit by political instability in the past year and its economy is showing increasing signs of vulnerability. Pakistan’s current account and trade deficits have widened as exports lag regional peers, while foreign-exchange reserves have dropped 27 per cent to $12.3 billion in the past year.

“It will help cool off immediate pressure, more than a billion dollars a month is being depleted in reserves,’’ said Karachi-based brokerage Arif Habib Ltd Chief Executive Officer Shahid Ali Habib. “It would have been better to raise a larger amount last time.”

The World Bank estimated in October that $17 billion of external financing — or 5 per cent to 6 per cent of gross domestic product — is needed in the current financial year through June for Pakistan to bridge its debt payments and current account deficit. Some analysts also believe the nation may need another International Monetary Fund bailout, which would be its 13th since 1988.

The IMF said last week said Pakistan faces continual “erosion” and its widening external and fiscal imbalances mean that “risks to Pakistan’s medium-term capacity to repay the fund have increased” since completion of a three-year $6.6 billion bailout program that ended in September 2016. Pakistan’s current-account deficit could reach 4.8 per cent of GDP in the year ending June, according to the IMF.

Pakistan’s de-facto Finance Minister Miftah Ismail, said in an interview last week that Islamabad is not considering going back to the IMF, but is considering issuing Chinese currency bonds. The ruling party, whose leaders face multiple legal and corruption charges, will be loath to go back to the IMF so soon after the last program ended as it would indicate economic mismanagement.

Investors have also been cautious on Pakistan after the Supreme Court in July barred former prime minister Nawaz Sharif from office following a probe into his family finances. Pakistan’s benchmark stock index was the worst performer globally last year, though it has seen a measured rebound since.