The government is once again looking up to the overseas Pakistani community to help it out of its financial woes. While the balance-of-payments crisis has been taken care of, to a good extent, through assistance packages from friendly states, the country’s dwindling foreign exchanges reserves – currently standing at $15.25 billion, including $8.86 held by the SBP – is still worrisome. Now with its eyes on the expatriate community, the government is launching Pakistan Banao Certificates on January 31 for shoring up its forex reserves. The dollar-dominated bonds certificates would be of two types – one with a three-year maturity carrying a 6.25% return and the other with a five-year maturity carrying a 6.75% return. The first-ever transaction of its nature targeting the overseas Pakistanis only, the bonds will be launched worldwide as against the government’s initial plan to float them only in the US and the UK.
Citing no specific reasons, the government expects a huge response to this diaspora bond from the expatriate community, but it has stopped short of disclosing a potential figure that it may have in mind. It is, thus, going to be an open-ended transaction whose size will be determined by the response from expatriate Pakistanis. The government’s optimism though needs to be analysed in the light of a few factors that are vital to the fate of these bonds. Much will depend upon how much more attractive this bond is for the Pakistanis abroad in comparison with other investment options available, like the property market. Investment into the bond by non-resident Pakistanis is also likely to have an adverse impact on regular remittances. The risk-benefit analysis of the bond is also a factor to reckon with.
The funding strategy was successfully used by India to offset international sanctions that came in the wake of the nuclear tests it conducted in 1998. Israel is another success story which is reported to have raised $40 billion through the diaspora bond since 1951. However, not all such efforts have succeeded. Greece is a recent example which failed to tackle its debt crisis in 2011 through such bonds. Have we correctly estimated the generosity of our natives abroad? Only time has the answer.
Published in The Express Tribune, January 28th, 2019.