By Staff Reporter
KARACHI: Pakistan’s dollar bonds fell on Friday as the country awaited the outcome of a closely contested general election, with early results showing a tight race between the main political parties.
The 2051 bond was down 5 cents to 60.8 cents on the dollar, the lowest since September 2022, while the 2029 and 2031 bonds also dropped, according to Bloomberg data.
The dollar-denominated government bonds slipped after polls closed on Thursday, with no clear winner emerging from the vote that was marred by allegations of rigging and a delay in the transmission of results.
Investors and credit rating agencies are watching the election closely, hoping for a stable government that can implement tough reforms to address Pakistan’s economic woes and secure another IMF programme.
“Uncertainty not only about the election results, but also about the legitimacy of those results, is causing weakness in bond prices,” said Abdul Kadir Hussain, head of fixed-income asset management at Arqaam Capital in Dubai.
“A stable political setup is required to negotiate and implement the IMF programme, without which debt sustainability is doubtful. So far indications are that the political setup will be far from stable,” he said.
Pakistan is facing an economic crisis, with a widening current account deficit, dwindling foreign reserves, weak growth and high inflation. The country has also been hit by a surge in militant violence and political polarisation.
Most of its sovereign dollar bonds slipped, with the September 2025 bond dropping to 85 cents on the dollar, according to Tradeweb data.
Moody’s Investor Services said that a timely announcement of election results would reduce political uncertainty in Pakistan.
“A timely announcement of the results, leading to a smooth formation of a new government, will reduce policy and political uncertainty,” Grace Lim, a Moody’s analyst, said.
“This is crucial for the country that is facing very challenging macroeconomic conditions, with fragile balance of payments, weak growth and high inflation.”
Lim said the new government would need to negotiate for another IMF programme after the current one expires in April 2024.
“Even under a new IMF programme, the new government will be tested on its willingness and ability to implement and sustain reforms, particularly revenue-raising measures, that may be politically unpopular, but necessary to improve macroeconomic conditions.”
On Thursday, Pakistan conducted General Elections 2024 that remained generally peaceful, but questions over the credibility of the electoral exercise continued to persist in the absence of the mainstream political force Pakistan Tehreek-e-Insaf (PTI), and a delay in the election results issuance.
As per preliminary and unofficial results, PTI-backed independent candidates were ahead of their rival candidates in several NA seats on Friday.
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