$1b Sukuk proves global confidence in Pakistan: Dar

Says investors shrugged off tensions with India while subscribing to bond at lowest ever interest rate

ISLAMABAD: Finance Minister Ishaq Dar on Thursday said global investors have shown confidence in Pakistan’s economy and shrugged off growing tensions with India while subscribing to the $1 billion Sukuk bond at the lowest ever interest rate of 5.5%.

“The 5.5% rate was 1.25% less than the one proposed by the five banks hired as joint lead managers to undertake the Sukuk bond transaction,” said a jubilant Dar while addressing a press conference after the successful launch of the bond.



Pakistan expects the money will be transferred to the treasury next week, increasing its overall foreign currency reserves to $24.5 billion, including $5 billion with commercial banks. The reserves are sufficient to finance an import bill of more than five months.

“The 5.5% is historic low rate is better than recent sovereign issuance of bonds by both Bahrain and Sri Lanka, the credit ratings of which are higher than Pakistan,” said Dar. He added that the joint lead managers were of the view that tensions at Line of Control (LoC) could negatively affect the transaction and Pakistan should offer the initial pricing close to 6.75%.



Over 100 blue chip institutional international investors including investment advisers, asset managers, banks and trusts mutual funds, pension funds and hedge funds for all across the globe placed the orders.

Dar said since tensions rose at LoC, the yield on Pakistan’s 2014 Sukuk bond declined by 0.6%, showing international investors’ nervousness. “However, Pakistan’s economic progress during last three years did not let the investors’ confidence shatter who bought Sukuk bonds at 5.5%.” It was the best ever Sukuk deal by any federal government but the transaction would add $1 billion into Pakistan’s debt pile, said Dr Ashfaque Hasan Khan, former director general of debt at the finance ministry. However, the finance minister said that the overall country’s debt would not grow, as the federal government will retire an equivalent amount, about Rs104.5 billion, in domestic debt.

Dar said the country received $2.4 billion offers from almost all the regions. As many as 38% of the total offers were from Europe, 27% each from North America and Middle East, 6% from Asia and remaining 2% from other parts of the world.



Dar maintained that no Pakistani invested in the Sukuk bonds. He said about 90 international investors bought Pakistani bonds out of 124 who showed interest. To a question, the minister said that the names of the investors cannot be disclosed under the international obligations.

The minister strongly rebutted rumours that Saudi Arabia has asked Pakistan to return the $1.5 billion gift it gave three years back. “It is an imagination of sick minds and aimed at spoiling Pak-Saudi brotherly relations,” said Dar. A relatively unknown news website claimed that Saudi Arabia was asking for its money. Dar said that he has passed the directions to Pakistan Telecommunication Authority to shutdown such websites that are working against the interests of the country.

Published in The Express Tribune, October 7^th, 2016.