PAKISTAN has successfully issued $3 billion through a landmark dual-tranche Eurobond transaction, the largest-ever international bond issuance by Pakistan in a single transaction. A statement issued by Ministry of Finance noted that the transaction attracted nearly $6 billion in orders – almost twice the amount issued – from a broad and diversified base of institutional investors across global markets and continents.
Significantly, the country achieved a remarkable success in raising money without physical road-shows as was done in the past and relied solely on online road-shows attracting investors from different parts of the world, including the US, Europe, the Gulf and others. It is said that successful transaction marks a major milestone in Pakistan’s renewed and increasingly diversified access to international capital markets, demonstrating strong investor confidence and country’s ability to access global funding markets at significant scale. Different bonds were issued in the past as well but the latest is major transaction reflecting improved trust of investors in Pakistan’s economy and marks a shift from traditional bilateral debt raising to greater reliance on bond’s market. Following the successful inaugural Panda Bond and improvements in Pakistan’s sovereign credit profile, this is the first issuance under Pakistan’s renewed strategic Global Medium-Term Note (GMTN) Programme – creating a platform for diversified access to international capital markets. The objective is not simply to raise additional debt. Pakistan is pursuing a broader strategy of active sovereign liability management – diversifying financing sources, extending maturities, reducing refinancing and rollover risks and creating opportunities to replace shorter-term and more expensive obligations with longer-duration, competitively priced financing where economically beneficial. The competitive pricing across both maturities (five and a half years and ten years), together with strong demand extending to 10-year tenor, demonstrates Pakistan’s ability to mobilise sizable longer-term financing as international investors reassess country’s improving macroeconomic and credit fundamentals.
It is, however, to be seen whether this is yet another addition to the country’s surging debt burden and what measures the authorities concerned take to lessen this reliance and improve ability of the country to pay back its debt. Our debt management strategy needs to be prepared and implemented in a fully transparent manner as existing approach of raising more debt to pay off previous one is not sustainable in view of the prevailing state of the economy. We also expect that like retirement of costly domestic debt, government will fulfill its commitment to retire costly bilateral debt to ease mounting pressure on economy.
