dollar bonds: Pakistan markets first dollar bond since 2015 as reserves fall

By Faseeh Mangi

Pakistan is marketing its first dollar-denominated bond since September 2015 as it seeks to pump up its foreign-exchange reserves, which have slumped 25 per cent.

The South Asian nation set initial guidance on the 10-year offering in the low 7 per cent area, according to a person familiar with the matter, who isn’t authorized to speak publicly and asked not to be identified. Pakistan is also offering a five-year Sukuk, with initial price talk of 6 per cent. It’s targeting a sale of as much as $3 billion, Prime Minister Shahid Khaqan Abbasi said in a text message this week.

The $284 billion economy is struggling with political and economic turmoil. The government this week capitulated to a fundamentalist group that was seeking the resignation of the nation’s law minister, while an arrest warrant has been issued for Finance Minister Ishaq Dar for failing to attend court proceedings looking into corruption charges. The nation’s foreign-exchange reserves are lower than those of smaller neighbor Bangladesh.

Dar, who is on a medical leave of absence in London, has denied any wrongdoing.

“Given financing pressures, I wouldn’t be surprised if the government prioritized size over price,” Mark Baker, a Hong Kong-based portfolio manager at Aberdeen Standard Investments, said earlier this week. Pakistan’s economic situation has become more challenging, with the fiscal- and current-account deficits widening, he said.

The nation’s economy is showing signs of stress, with the current-account deficit more than doubling to $14.4 billion in the year through September. Foreign-exchange reserves held with the central bank dropped by 25 per cent to $13.3 billion in the year to Sept. 30.

S&P Global Ratings assigned a B rating, its fifth-lowest non-investment grade, to the proposed bond offering.

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