The Asian Development Bank (ADB) on Wednesday announced that it has raised PKR 1.83 billion ($11.4 million) in a first issue of local currency karakoram bonds by a multilateral development bank.

As per ADB, a karakoram bond is an offshore bond denominated in Pakistan rupees and settled in US dollars, listed on a major stock exchange and settled through an international central securities depositary.

The international bond issue pays a 7.50% semi-annual coupon and matures in August 2023. The bonds were arranged by Citigroup Global Markets and sold to European asset managers.

The net proceeds from the sale of the bond issue will be included in ADB’s ordinary capital resources. Previously, ADB had no local currency loans in Pakistan, but this option will be offered in future projects as an alternative to dollar borrowing. It is anticipated that ADB’s local currency loans will be a boost to private sector development in Pakistan.

Back in August, the Economic Coordination Committee (ECC) of the Cabinet allowed ADB to launch offshore Pakistan Rupee (PKR)-linked bonds of up to $200 million to non-residents based on conducive market conditions.

“Engineering local currency solutions is both an art and a science,” said ADB Treasurer Pierre Van Peteghem. “Not only must we marry investor demand with market conditions to achieve optimal currency and interest rates, but we must also dedicate time and resources to a close dialogue with the government to achieve the best possible outcome.”

“The Pakistan rupee-linked karakoram bond floated by ADB is an excellent initiative. I am confident it will have significant mutually beneficial outcomes for Pakistan and ADB,” said Adviser to Pakistan’s Prime Minister on Finance and Revenue Abdul Hafeez Shaikh.

State Bank of Pakistan Governor Reza Baqir congratulated the ADB team and affirmed his appreciation of ADB’s support for Pakistan’s financial and economic development. “ADB’s inaugural issue of Pakistan rupee-linked karakoram bonds will help deepen the capital markets of Pakistan while channeling funding to vital economic sectors,” he said.

ADB stated that it appreciates the support provided by the SBP to facilitate coordination with the government to successfully start this program.

ADB has already issued local currency bonds in Indian rupees, Kazakhstan tenge, and Mongolian togrog in 2020.