As road shows for introducing bonds in international markets including US, EU, and UAE, has just started from today (Wednesday), Pakistan is ready to issue Euro and Sukuk bonds in the international market out of which the country would be able to generate $3 billion.
The federal cabinet approved to borrow up to $3 billion from international debt markets for the country during November, in order to maintain depleting foreign reserves this decision was taken. Now the government is planning to raise capital from International debt markets by issuing bonds that would eventually support to sustain foreign exchange reserves continuously under pressure due to widening trade deficit.
Pakistan’s trade deficit has been widening since past few years, the number of imports is perpetually increasing as compared to exports which are stagnant or even decreasing due to unfavorable economic policies of the current government. The icing on the cake is the current account deficit, the State Bank of Pakistan issued information on increasing trade deficit for the current fiscal year from July to October 2017, SBP said the current account deficit was increased by 100 percent during this period as compared to previous year.
Pakistan’s external sector is also under pressure due to current account deficit which is eating up the foreign exchange reserves of the country. The foreign exchange reserves were slumped by over $4 billion in just one year reaching to $19.8 billion.
The government has now taken measures to provide a cushion to depleting foreign reserves and improve the foreign financial inflows, by launching sovereign bonds into the international markets would generate up to $3 billion. However, the exact amount generated is still dependent on the response from international markets which would take place subsequently after the road shows, said an official of the Finance Ministry.
While providing the details official said, the first roadshow will be held today in Dubai and the next roadshow would be organized in London on November 23 and 24. After the roadshows in UAE and Europe, a roadshow in Boston and New York would be held on November 27 and November 28 respectively.
Pakistan has already been able to raise capital from the international markets lately, four times since 2014. The government of Pakistan borrowed $2 billion in 2014 through international debt markets. The current government has borrowed $35 billion of foreign loans during the last four years and $17 billion was just borrowed to repay the previous loans.
However, according to the financial analysts, Pakistan’s credit rating remains stable or improved during the last few years. According to the international credit rating agencies such as Moody, Standard & Poor (S&P) and Fitch Pakistan’s rating is B (stable). But Pakistan’s growing debt, current account deficit, and the trade deficit are alarming. The government must have to take rigorous measures for the next five years to bring the country’s debt position under control.