October remittances grow 14pc, rising for fifth straight monthGovt to issue $1.5bn bonds in two months

ISLAMABAD: Pakistan plans to float much delayed Eurobonds $1-1.5 billion within two months to shore up foreign exchange reserves.

Finance ministry’s spokesperson Kamran Ali Afzal on Wednesday told journalists that bids for appointment of lead manager for the Eurobond issue had been received from 10 leading international banks. The bids were opened on Tuesday and adding all the traditional top rank banks were among the bidders, he said.

He said the bids would be evaluated in the coming days and after selection of lead manager/financial adviser the bond floatation was planned by end-December/early January. He said the target for the Eurobond was around $1bn but exact size would depend on the bids and may go up.

Responding to a question, Mr Afzal said the launch of international sukuk was also part of the financing plan for current fiscal year but its timelines had not been set as yet.

Pakistan’s previous 10 year international bond was currently trading at about 9.89pc, up from about 8pc in May this year against 7pc policy rate of the State Bank of Pakistan and rate of inflation at about 8.9pc.

At present, Moody’s credit rating for Pakistan stands at B3 with stable outlook, while Standard & Poor’s and Fitch Rating place the country at B(negative) with stable outlook.

Responding to another question, the pay and pension commission led by former secretary Nargis Sethi was required to complete its recommendations within six months for inclusion in the next year budget. He said it was quite clear that terms and conditions of the existing government employees could not be altered and hence their pension benefits would remain unchanged but some contributory pension mechanism would have to be put in place for future employees.

About $1.5bn worth of Eurobonds were part of the last fiscal year’s financing plan but were delayed due to adverse market conditions arising out of some arbitration proceedings and the government’s greater focus on easier option of hot money involving up to 13.25pc mark up that later evaporated.

Also some breathing space had been creating after the IMF provided about $1.4bn in Rapid Financing Instrument (RFI) in the wake of Covid-19 pandemic, debt relief from G-20 countries as part of support to poor nations and early disbursements of some programme and project loans by the World Bank, Asian Development Bank and Asian Infrastructure Investment Bank.

For current fiscal year, the government is again eyeing international borrowing through sovereign bonds to meet external debt obligations and sustain foreign exchange reserves above certain level.

The foreign exchange raised through international bonds is generally repayable over 5-10 years. Informed sources said alternate arrangements were in place to cover up some expected outflows over the next few months.

Pakistan fiscal deficit in the first quarter of the current fiscal year has amounted to 1.1pc of GDP, almost 0.4pc higher than same period of last year, owing to lower revenues and higher expenditures.