July 14, 2022 (MLN): Pakistan’s dollar bonds maturing in 2031 and 2051 are due for a bounce of at least about five points after the IMF deal, Nicholas Yap, Head of Asia credit desk analysts at Nomura said, quoted by Bloomberg.
“But there’s limited upside beyond that considering fragile EM sentiment and the country’s weak fiscal and external position,” Nicholas Yap said.
Another concern is elevated political uncertainty with the current ruling coalition comprising multiple parties with divergent interests, which may complicate the implementation of IMF- mandated reforms, especially with elections due by mid-2023.
IMF team, led by Nathan Porter has reached a staff-level agreement (SLA) with the Pakistan authorities for the conclusion of the combined seventh and eighth reviews of the Extended Fund Facility (EFF)-supported program.
Accordingly, the country will receive $1.177 billion after the approval of the IMF’s Executive Board, bringing total disbursements under the program to about $4.2 billion.
Nomura, the global investment banking powerhouse based in Japan, is overweight on Pakistan’s 2022 Sukuk, which has a high likelihood to be redeemed at par in December. It’s currently trading near 91, it added.
The IMF program “should alleviate fears of a near-term default scenario and unlock funding from other multilateral lenders,” the note said.
