DUBAI: Pakistan plans to issue a US dollar-denominated Islamic bond worth at least $500m this month and also hopes to obtain $1.1bn from the International Monetary Fund soon, Finance Minister Ishaq Dar said yesterday.
After a successful eurobond issue in April, Pakistan said it planned an international sovereign sukuk issue, and in early September it revealed it had selected four banks — Citigroup, Deutsche Bank, Dubai Islamic Bank and Standard Chartered — as bookrunners.
But the issue did not happen as soon as the market expected, apparently because of political instability in the country, as Pakistani Prime Minister Nawaz Sharif came under pressure from weeks of demonstrations calling for him to resign.
“Hopefully in the last week of this month the sukuk, God willing, will be available to the industry, Islamic banking institutions,” Dar told a joint press conference with the IMF in the United Arab Emirates.
“The indicative size for a sovereign bond, we have $500m. We will see...what is the book building...but we had a very good response when we issued the sovereign conventional paper,” he said without giving further details.
The Pakistani government now also hopes to receive $1.1bn in funding from the IMF to bolster its foreign currency reserves, after completing the fourth and fifth reviews of a $6.6bn IMF financing programme originally agreed in September last year.
The IMF’s executive board will consider in December whether to release the funds, its mission chief Jeffrey Franks said, adding that the Fund was encouraged by Pakistan’s overall progress in strengthening its macroeconomic stability and output growth.
The IMF usually disburses financing from the programme in $550m tranches, but completion of the fourth review was delayed by differences of opinion over some of the targets in the plan, Franks said without elaborating on those differences.
“Economic indicators are improving, with growth expected to reach 4.3 percent in fiscal year 2014/2015, inflation on a downward trajectory, and credit to the private sector expanding at a robust pace,” he said.
The rapid build-up of Pakistan’s gross reserves, which jumped to $9.1bn at the end of June from $5.4bn in March, stalled because of delays in state asset sales and the sukuk issue, as well as the effects of political uncertainty on capital flows.
“However, going forward reserves are expected to surpass three months of imports by the end of the fiscal year 2014/2015,” Franks said.
The IMF saved Pakistan from possible default by agreeing last year on its three-year lending programme. The Fund disburses loan tranches after confirming a country is on track with the conditions of the bailout.
The cash flows could stop if Pakistan fails to institute changes such as cracking down on tax evasion and privatising loss-making state companies.
A recent drop in global oil prices, which touched four-year lows beneath $82 per barrel this week, will help Pakistan to slash its oil import bill substantially.
“We are now forecasting that the oil import bill for Pakistan compared to what we thought a few months ago is going to be over a billion dollars less. That’s 0.3, 0.4 percent of GDP saved by a lower petroleum import bill,” Franks said. Reuters
