By Staff Reporter
KARACHI: Pakistan’s sovereign dollar-bonds rose on Monday, extending last week’s gains after the government secured a $3 billion financing deal with the International Monetary Fund (IMF) to avert a default.
The 2024 and 2025 bonds added more than 1 cent to trade at 72 cents and 55 cents on the dollar respectively, Tradeweb data showed. The 2024 issue reached its highest since August 2022 and has doubled from its October low of around 37 cents.
The bonds have notched up sharp gains after the government said on Friday it had secured a short-term financial package from the fund, giving the cash-strapped South Asian economy a long-awaited respite as it teeters on the brink of default.
The IMF agreement comes ahead of a general election due by November and provides some relief for the cash-strapped South Asian economy.
Analysts said the agreement with the IMF, which comes ahead of the country’s general elections due by November, had exceeded their expectations.
“We believe the IMF financing arrangement provides breathing room for the country during the upcoming election period while lowering the risk of a payment halt,” Avanti Save at Barclays wrote in a note to clients published on Monday.
Barclays said it upgraded its outlook on Pakistan’s sovereign-dollar bonds to ‘market weight’ from ‘underweight’, and recommended buying the 2025, 2026, 2027 and 2031 maturities.
Those issues still traded at prices much lower than other non-defaulted emerging market peers and below the bank’s recovery estimates in the case of a reprofiling, Barclays added.
The bailout would ease payment pressures and allow for multilateral and bilateral financing for the South Asian nation, Avanti Save, a credit analyst at Barclays in Singapore, wrote in a note.
Pakistan’s bonds maturing 2025, 2026, 2027 and 2031 are recommended as “recent developments with the IMF have exceeded our expectations,” Save wrote.
Barclays’ recommendation comes as the notes trade at prices lower other emerging market peers that haven’t defaulted.
“IMF’s $3 billion 9-month stand-by-agreement will give breathing room to a new government to construct its economic policies and lower the chance of a default.”
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