$6.5 billion bonds in four years

The government has issued $6.5 billion Sukuk and Eurobonds in the international capital market during the last four years for balance of payment and budgetary supports. Finance Division was set to brief the Senate Standing Committee on Finance on December 19 but the meeting could not take place and was deferred owing to a briefing by the Chief of Army Staff to the Senate Committee of the Whole.
According to the brief of the Finance Division, the incumbent government has launched $3 billion international Sukuk with $1 billion in December 2014 at 6.75 percent rate of return for five years tenor against Islamabad-Chakwal section of M2 followed by $1 billion in October 2016 at 5.5 percent rate of return for five years tenor against Hafizabad-Lahore section of M2 and $1 billion in November 2017 at 5.625 percent rate of return for five years tenor against Chakwal-Hafizabad section of M2.
The government issued $3.5 billion international Eurobond with $1 billion in August 2014 for a tenor of 5 years at 7.25 percent rate of return and $1 billion for a tenor of 10 years at 8.25 percent rate of return. Another $500 million Eurobond was issued in the international capital market for a period of ten years in September 2015 at 8.25 percent rate of return and $1.5 billion for a period of ten years in November 2017 at 6.875 percent rate of return. Finance Ministry stated all proceeds of Sukuk and Eurobonds were utilised for balance of payment and budgetary support.
According to the brief, issuance of Euro and Sukuk bonds has been part of government of Pakistan''s financing plan since 1994 and 2005 respectively. It envisages regular presence of Pakistan in the international or domestic capital markets, as it provides alternative source of financing at a competitive rate. Finance Division is mandated to arrange finances for meeting the current and development expenditure needs of the country.
Finance Division stated that on November 2, 2017, the federal cabinet accorded its approval for issuance of Pakistan International Sovereign Sukuk 2017 and Pakistan International Sovereign Bond 2017. The cabinet allowed Finance Division multiple tranche issuances of Sukuk and Eurobonds with combined proceeds of around $2-3 billion. The cabinet also allowed the federal government to grant exemptions under the provisions of the income tax Ordinance, 2001 and capital value tax under Finance Act, 1989.
Accordingly, the process of issuance of Sukuk and Eurobond started with the engagement of Joint Lead Managers (JLMs) comprising Standard Chartered Bank, Citibank, Deutsche Bank, Industrial and Commercial Bank of China, Dubai Islamic Bank and Noor Bank through a competitive bidding.
Road shows were held in Dubai, London, Boston and New York by a team comprising Special Assistant to the Prime Minister on Economic Affairs, Finance Secretary and Governor State Bank of Pakistan. The team held meetings with over 300 potential institutional investors in these major financial centers in close coordination with the JLMs.