Pakistan to raise another $3.5b worth of Eurobonds


Amid concern over high cost of unconventional borrowings, Pakistan is planning to raise another $3.5 billion from international debt markets by floating Eurobonds over a period of three years to retire earlier loans. A new medium-term debt management strategy that the ministry of finance unveiled this week gives a plan for floating dollar-denominated Eurobonds up to fiscal year 2018-19.

Last month, the Senate Standing Committee on Finance decided to summon representatives of three international banks that the government hired for offering $500 million worth of Eurobonds after it suspected that the money invested by foreigners had actually flown from Pakistan. The government insists that the resources mobilised by the bonds were used to retire the expensive domestic debt in the past. It intends to raise $1 billion in 2015-16 and thereafter $500 million each in 2016-17 and 2017-18, according to the debt strategy.

The new debt strategy largely focuses on diversification of financing and lengthening the maturity of debt profile. However, it has completely ignored implications of the off-budget fiscal risk for the country’s debt projections. A recent report of the International Monetary Fund (IMF) has given broader pillars for strengthening the debt and public finance management to reduce fiscal risks. “A debt management strategy based on building funding buffers, assessing off-budget fiscal risks, diversifying financing from both domestic and external sources and lengthening the maturity profile of domestic debt will help mitigate these risks,” said the IMF.


The debt strategy has used ambitious macroeconomic projections for its calculations, unlike the IMF that is taking a conservative approach. The government has projected that the economy will grow at a pace of 6.5 per cent in 2016-17 while the IMF puts the expansion at 4.7 per cent