BML 5.01 Decreased By ▼ -0.05 (-0.99%)
BOP 13.08 Increased By ▲ 0.08 (0.62%)
CNERGY 7.12 No Change ▼ 0.00 (0%)
CPHL 87.45 Increased By ▲ 1.38 (1.6%)
DCL 14.34 Decreased By ▼ -0.33 (-2.25%)
DGKC 170.76 Increased By ▲ 1.95 (1.16%)
FCCL 46.76 Increased By ▲ 0.59 (1.28%)
FFL 15.82 Decreased By ▼ -0.10 (-0.63%)
GCIL 26.87 Decreased By ▼ -0.39 (-1.43%)
HUBC 144.18 Increased By ▲ 2.27 (1.6%)
KEL 5.07 Decreased By ▼ -0.05 (-0.98%)
KOSM 6.69 Decreased By ▼ -0.20 (-2.9%)
LOTCHEM 20.59 Decreased By ▼ -0.41 (-1.95%)
MLCF 84.73 Increased By ▲ 0.66 (0.79%)
NBP 121.82 Decreased By ▼ -0.56 (-0.46%)
PAEL 43.46 Increased By ▲ 1.28 (3.03%)
PIAHCLA 22.29 Increased By ▲ 0.33 (1.5%)
PIBTL 8.93 Decreased By ▼ -0.06 (-0.67%)
POWER 14.01 Decreased By ▼ -0.08 (-0.57%)
PPL 169.94 Decreased By ▼ -0.01 (-0.01%)
PREMA 43.39 Decreased By ▼ -0.38 (-0.87%)
PRL 33.11 Increased By ▲ 0.24 (0.73%)
PTC 24.26 Decreased By ▼ -0.33 (-1.34%)
SNGP 119.64 Increased By ▲ 0.34 (0.28%)
SSGC 45.55 Increased By ▲ 0.38 (0.84%)
TELE 8.08 Decreased By ▼ -0.09 (-1.1%)
TPLP 10.47 Increased By ▲ 0.14 (1.36%)
TREET 23.97 Decreased By ▼ -0.18 (-0.75%)
TRG 58.05 Decreased By ▼ -0.80 (-1.36%)
WTL 1.52 Decreased By ▼ -0.03 (-1.94%)
BR100 13,631 Increased By 52 (0.38%)
BR30 39,851 Increased By 184.3 (0.46%)
KSE100 134,300 Increased By 517.4 (0.39%)
KSE30 40,814 Increased By 132.5 (0.33%)

EDITORIAL: The government of Pakistan is issuing its fourth sukuk in the international debt market. The timing of this issue coincides with the IMF’s (International Monetary Fund’s) 6th review meeting by its board of directors on 28th January 2021. Pakistani authorities were likely waiting for the update on IMF’s calendar before issuing the bond.

With a growing current account deficit and ballooning debt repayments, the external financing needs for the second half of the fiscal year are enormous, to say the least. Pakistan had recently issued Eurobonds worth $3.5 billion - $2.5 billion in April 2021 and $1 billion in October 2021. These bonds were issued for 5-year, 10-year and 30-year tenors or maturity and the rates varied from 6 percent to 8.88 percent.

The sukuk issued in December 2017 fetched $1 billion for 5 years at 5.63 percent. Now a sukuk issue is in the works.

The issue would be for 7 years, a first for Pakistan. The questions about the yield of the bond and the quantum of the issue have no answers.

There are, however, indications based on existing bond yields in the secondary market. One bond, which will be maturing in 2027, is trading around 7.5 percent.

Seeing this and considering the new issuance premium, the 7-year bond yield could be around 8 percent. There may however be some discount for the sukuk issue and the government may be able to fetch around 7.75 percent.

On the question of size, there are two parameters to check. One is what the government has budgeted, and the other is whether assets are available for the sukuk issuance. The government in this budget has allocated a sum of $3.5 billion to raise from the international capital market. Already, $1 billion Eurobonds were issued in October. The remaining are of $2.5 billion. It, therefore, increasingly appears that the government will confine itself to around $1 billion.

Market rates have moved up internationally due to rising global inflation. In the case of Pakistan, however external account vulnerabilities are growing with rising oil prices and increased tensions in the Middle Eastern region.

The secondary market yields have moved up recently and this phenomenon is coinciding with the timing of issuance. Pakistan cannot delay its issuance due to repayment considerations.

The issuance is already delayed due to the delay in IMF board’s nod. Seeing all these factors, we can safely deduce that $1 billion will be raised in this issue at around 7.75 percent. With open tap, expecting another $1.5 billion issuance before June end this year would be in order.

Copyright Business Recorder, 2022

Comments

Comments are closed.