$500 million Eurobond: Senate body terms issuance flawed decision

Senate Standing Committee on Finance has termed issuance of $500 million Eurobond by the government at 8.25 per cent interest rate a flawed decision and stated that Pakistan may now be rated in global bond market with countries like Kenya and Zambia.
A meeting of Senate Standing Committee on Finance chaired by Saleem Mandviwala on Friday held an in-camera session to take briefing from officials of Ministry of Finance and State Bank of Pakistan (SBP) on the urgency of issuance of Eurobond at 'exorbitant' interest rates and why the transaction was not called off. Mandviwala said timing of transaction was flawed and if current depreciation component is included, the cost of interest would go further up.
Secretary Finance said: "if we had called it off, we wouldn't have known the extent of interest." The committee also inquired from senior officials of SBP whether there was any other country that issued bonds at such a high interest rate. Officials of SBP said that some African countries have issued bonds at the same rate; however they could not identify any country. The committee concerned at a rise in fake currency even in banks inquired whether the regulator was sensitive to the issue and taking measure in this regard. Deputy Governor SBP Riaz Riazuddin said cash processing system is being improved and all the banks have been given time till January 2017 to put in place machines to detect counterfeit notes. After the deadline no bank would be allowed to process any note without a machine, he said adding that SBP has decided to install two counterfeit note detecting machines by March 2016 and a tender for their procurement has already been issued. Deputy Governor said as of now banks had only cash counting machines.
Riazuddin said SBP would also launch an awareness campaign and has prepared a documentary to educate how to check counterfeit notes. The committee also asked the central bank for issuance of directives to banks and exchange companies not to staple the dollars because such notes are not accepted abroad. At present, there is no recourse/remedy to counterfeit notes, acknowledged SBP. The Secretary Finance said any remedy to the counterfeit notes would be taken as an encouragement.
The committee delayed approval of the State Bank of Pakistan Amendment Act Bill due to some reservations especially with respect to making fiscal offences part of the ASML. Mandviwala said the law appears to have been prepared in haste on the dictation of the International Monetary Fund (IMF) because fiscal offences also include legally allowed non-filers of tax returns. He said that Secretary Finance and Finance Minister Ishaq Dar must have been aware of consequences of AML because anyone charged with such a small issue would be denied a visa.
The Secretary Finance said that amendments have been proposed in the SBP law to create a monetary policy committee by inducting experts from the market as well as to do away with the role of Board of Directors. The Chairman of the Committee wants to know whether proposed amendment is government driven or IMF dictated and what difference it would make if all monetary policy committee members are to be appointed by the government. The Secretary Finance requested approval of the proposed laws, AML and an amendment to SBP act, in the next meeting on October 8, 2015.