The government plans to raise $1 billion from the international debt market through issuance of Eurobonds in October 2016 with the objective of building foreign exchange reserves ahead of approaching debt repayments from next year onwards.
As debt repayment to the International Monetary Fund (IMF) as well as other obligations will begin from next year, the country’s foreign exchange reserves are expected to come under pressure; the government has therefore started exploring all the options to mobilize as much foreign inflows as possible through various instruments.
Sources said road-shows have been planned in the first week of October 2016 to attract investors from Middle East, Europe and USA. As Finance Ministry is optimistic of a positive response because of the country’s positive rating by international rating agencies as well as macroeconomic outlook, Dar has chosen next moth to initiate the process.
Size of the Eurobonds, sources added, may vary depending on the market response. Pakistan would announce the price of its Eurobonds and the period these would be issued for at the conclusion of the road shows.
First week of October 2016 is being considered for the launch of the Eurobonds because by then Pakistan is expected to have successfully completed the $6.64 billion Extended Fund Facility (EFF) programme and received the last tranche subsequent to approval of staff level report by the Board scheduled for September 28.
On condition of anonymity, sources in Finance Ministry said lack of growth in remittances has been a source of worry for Finance Minister Ishaq Dar and his team. So far remittances had facilitated in minimizing the trade deficit. As there was hardly any growth in remittances in recent months the pressure of a rising trade deficit would require strengthening of foreign exchange reserves.
Sources said Pakistan’s presence in the international market has opened up multiple options of borrowing to meet our financing requirements and issuance of bonds is one such option.