Pakistan to raise $2bn in bonds amid IMF uncertainty

Thursday June 8, 2023Thursday June 8, 2023

By Staff Reporter

ISLAMABAD: Pakistan plans to raise $2 billion by issuing international bonds in the next fiscal year, as it seeks to secure over $22 billion in foreign loans amid uncertainty over its International Monetary Fund (IMF) programme.

The country failed to launch any international bonds in the current fiscal year ending on June 30, mainly due to the suspension of the IMF bailout deal, a deteriorated credit rating, and increased bond rates and risks.

The $6.7 billion IMF’s programme, which was agreed in 2019 and aimed to help Pakistan avert a balance of payments crisis, has been on hold since November 2022 due to the differences over the country’s funding needs and commitments from lenders, other than the IMF to fund them.

The country is scrambling to secure the remaining $2 billion in external funding it needs to revive the fund’s package. The government has lined up $4 billion in external financing from Saudi Arabia, the United Arab Emirates and China, and hopes to obtain a deal with the lender before it unveils its budget on Friday.

The loan programme is set to expire in end June and has been stalled for more than six months. The IMF tranche is critical for the country as it will also unlock financing from friendly countries, helping Pakistan avert default.

“The government is confident that it will be able to launch international bonds worth $2 billion in the next fiscal year,” an official said, adding that the timing and terms of the issuance would depend on market conditions and investor appetite.

A Karachi-based analyst said the government’s success in raising the required foreign bond financing will depend on a number of factors, including market conditions, investor appetite and most importantly IMF programme.

Meanwhile, Pakistan’s dollar bonds due in April 2024 advanced the whole last week, with the notes quoted at about 56.35 cents on the dollar.

A month back the yield on Pakistan’s US dollar-denominated bond experienced a significant surge, climbing 73 basis points to 106.37 per cent in the international market.

The spike suggests an elevated risk of default on foreign debt repayment for the country. The yield on the 10-year Pakistan Government International Bond, valued at $1 billion and maturing on April 15, 2024, has seen a cumulative increase of 30.60 percentage points in the past five months.