Pakistan has been successful to raise 2.5 billion USD against its debt securities auction, with major chunk of funds coming in from 5-year Sukuks and 10-year Eurobonds.
Foreign Investors had offered up to $ 8 billion, however, Government has only accepted bids worth of $ 2.5 billion. Of the raised amount, 5-year Sukuk raised around $ 1 Billion at a 5.625% return. The rest of the amount was raised from the 10-year Eurobond at a 6.875% return.
| Tenor | Amount ($ Bn) | Rate of Return |
|---|---|---|
| 5 Year (Sukuk) | 1.00 | 5.625% |
| 10 Year | 1.50 | 6.875% |
The said issue was in line with Government’s expected amount as investor participation was overwhelming in the beginning clocking in at $8 billion. The yields were lower than anticipated as Sukuk Issue was raised at a rate of 5.625% against the expected rate of 5.75 – 5.875%. In addition to the Sukuk Issue, the Eurobond was raised at a rate of 6.785% against the expected rate of 7%. The subscription of the instruments at lower rates reveals a positive perception of Pakistan debt in the eyes of foreign investors.
The orders received came in from various blue chip institutional international investors from around the world. Of the total orders received; 44% of the orders were by investors from Europe, 24% from Asia, 20% from North America, 8% Middle East and 12% from other regions.
The roadshows for the issuance of Bonds kicked off in Dubai, London, Boston and New York during last week. The campaign for the bond issue was spearheaded by Mr. Miftah Ismail Special Assistant to the Prime Minister on Economic Affairs, Mr. Shahid Mahmood Finance Secretary and Mr. Tariq Bajwa Governor State Bank of Pakistan. Pakistani delegation held numerous meetings with around a 100 potential institutional investors in these major financial centers.
The issue is expected to help Pakistan with declining reserves to replenish the sum by around $ 2.5 billion. However, Pakistan continues to face pressures on external front as balance of trade continues to remain skewed towards imports with very low exports.
Keeping in view the peer auctions, similarly rated Egypt still traded at tighter spreads compared to Pakistan. The same was the case with Sri Lanka, which is better rated than Pakistan. Both these countries signed support agreements with the IMF in 2016.
