Pak should launch Eurobonds - Pak Global Bond Yields- from 25% to 9%

September 30, 2024 (MLN): Expectations evolve over time. The ouster of the PTI regime brought significant political and economic instability, derailing the short-term growth achieved post-COVID-19.

From fuel subsidies to declining FX reserves, IMF bailout issues, political turmoil, and even attacks on military installations—Pakistan faced countless crises. Yet, markets have made a U-turn in the right direction.

At peak default risk, Pakistan's global bond yields soared to 30-40%, and bonds traded at 50-60% discounts amid fears of political instability and economic collapse. FX reserves dropped to under $4 billion, import controls tightened, and domestic dollarization increased. Even T-bill auction yields surpassed 25%, causing panic.

However, long-term PIB bond yields have stabilized close to 12%, and 2051 maturity USD bonds have improved from over 25% to 11%.

Now is the time for Pakistan to engage global investment banks to issue sukuk or green bonds to secure cheaper financing at 8-9%, which could replace more expensive debt at 11%.

Is saving $12-18 million a year really "peanuts"? Every penny saved counts—whether to repay debt, reduce taxes, or invest in education.

With improved credit ratings from Fitch, Moody’s, and S&P, Pakistan should focus on financing infrastructure upgrades to boost exports and tax revenues. How about upgrading the railways to 200 km/h between Karachi and Lahore? Imagine the impact.

Good recovery, considering the boys were five wickets down in the first ten overs. Keep up the run-rate!
 

The author is an independent economic analyst and writes on Twitter and Linkedin.

Disclaimer: The views and analysis in this article are the opinions of the author and are for informational purposes only. It is not intended to be financial or investment advice and should not be the basis for making financial decisions.