The tail-end of June is always a time of desperation for the government as the taxmen run from pillar to post, trying to meet towering targets set out by their much more media savvy politically elected peers. As such, it is but natural this time of the year to find a plethora of advertisements in local media using a variety of carrots and sticks to entice tax dodgers to mend their ways.
However, this year the government appears much more desperate to raise revenues and the means being considered are well, just as desperate. Case in point: the hurried attempt to auction off exchangeable bonds of Oil and Gas Development Company (OGDC) and the subsequent withdrawal of this plan in the face of certain failure.
On 17 June, a rather optimistic government official coolly told reporters that the government would "easily" auction off $500 million worth of exchangeable bonds of OGDC. At the time, the official, whose name has only been held back to limit the embarrassment that he must be feeling, asserted that the relevant financial managers have assured that this is the "perfect time" to float such a deal.
Hardly a week later on 24 June, the same official informed journalists that the plan had been shelved on the advice of the same "financial managers", this time sounding as sheepish as he was pompous in his previous encounter with the media.
Interestingly, both decisions were attributed to the financial advisory consortium comprised of Citibank, Credit Suisse, JP Morgan and BMA Capital. However, well-informed sources revealed that the decision to sell the bonds in haste was never supported by these financial powerhouses.
In fact, government officials have publicly opined that this transaction would be completed before the end of FY11 since before the financial advisory consortium was finalized in mid-May.
So, it appears that the government was well-aware, well in advance that it would have to raise funds by issuing these bonds. Unfortunately, it was not so obvious to policymakers that it takes more than a trip each to Singapore and London and five days notice to sell bonds worth $500 million.
But this aborted endeavour can have a detrimental impact on subsequent attempts to market the same bonds, even if the authorities actually do their homework this time around.
After all, what interpretations do prospective investors derive from such hurried attempts to put up the family silver as collateral in exchange for a sum that pales in comparison to the overall deficit that remains unmet?
The issuance of a bond against shares of a blue chip such as OGDC must be executed to maximise returns, not to beat the clock on deficit financing. While the governments eventual decision to delay this offering to the next quarter is wise, it is indeed disturbing to note that this verdict was reached after receiving a cold response from prospective investors abroad.