KARACHI: The government is going to issue panda bonds, which are sold in China through a non-Chinese issuer, according to Muhammad Omar Zahid, director-general of loans at the finance ministry.
Addressing members of the CFA Society of Pakistan on Monday, Mr. Zahid said the federal government was considering issuing Eurobonds as well as Sukuk and Green bonds in the current financial year to end its financial aid.
“We will now maintain our presence in the international capital markets on a permanent basis,”
Out of the projected federal fiscal deficit of Rs 4 trillion in 2021-22, the government is committed to financing Rs 1.5 trillion through external loans. Plans to finance Rs 4 trillion out of projected federal deficit, Rs 1.5 trillion through external borrowing.
Referring to the expected breakdown of external financing, he said the government would raise Rs 0.34 trillion through Eurobonds. About Rs 0.11 will be raised through Sukuk / Green Bonds / Panda Bonds while Rs 1.05 will be raised through multilateral and bilateral sources.
The remaining 2.5, 2021-2022 financing requirements will be met from local sources, including 1 trial of local Sukuk.
In response to a question about the timing of domestic Islamic bonds, a senior official in the debt management department said he was awaiting approval from the central bank’s Shariah Committee.
We have a list of NHA (National Highway Authority) assets available. These are different motorways. We have three airports – Multan, Islamabad, and Lahore – that we are being valued for. Once we get the price, we will announce the appropriate launch calendar for the entire financial year. If market conditions are favorable, raise more than 1 trillion through Sukuk.
Mr. Zahid said there was no cause for concern as far as the repayment of about 14 billion in foreign loans in 2021-22 was concerned.”That number can’t be so high when we distribute it to refinancing and new needs, “The only thing to worry about is 86.4% maturity, which is from Eurobonds / Sukuk. And the rest of the maturity is on the multilateral and bilateral departments
He said 78% of the country’s total external public debt of 86.4 billion comes from concessional terms, low cost, and long-term multilateral and bilateral sources.
He acknowledged that the commercial share of the country’s external public debt – including Euro bonds and foreign bank loans – increased from a total of 18% in 2019-20 to 22% in 2020-21. “We issued about 2.5 billion in Euro bonds and also raised money through commercial banks and the New Pakistan Certificate,” he said. Mr. Zahid said he was assuring the market that things were moving in the right direction with regard to the ongoing negotiations with the International Monetary Fund (IMF) on the pending loan program. In the unlikely event of a failed negotiation, he said, “Plan B is to increase our flow through commercial means, such as issuing bonds and commercial loans from foreign banks.”Responding to a question, he said that a reduction of one rupee in the exchange rate increases external debt by Rs 86 billion. If the rate were reduced by Rs 10, the external debt portfolio would be increased by Rs 860 billion.
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