After putting a dent on the country’s financial credibility on the international front and making investments in its financial instruments more risky due to mismanagement, the government has postponed indefinitely the issuance of exchangeable bonds.
“Owing to Greek debt crisis and weak US economic data … [the government will go to] the international market at an opportune time,” said a spokesman for the Privatisation Commission.
During roadshows in Europe and Far East Asia in the third week of June, international investors advised Islamabad to wait for an appropriate time for floating exchangeable bonds worth $500 to $650 million. The government wanted to issue the bond, backed by 10 per cent shares of Oil and Gas Development Company (OGDCL), by June 26 to raise money for budget financing.
Independent economic experts and capital market specialists had advised the government against selling OGDCL shares for budget financing. They also questioned the rationale behind entering the world market at a time when investor confidence was at the lowest due to the Greek debt crisis and lingering default by the US government.
The government has spent millions of dollars on managing the event and its failure in getting a favourable response from international investors also widened spread on Pakistani papers by 200 basis points, said Dr Ashfaque Hasan Khan, Dean of the Business School of NUST.
The government has to explain as to why it went to the market when the privatisation secretary himself admitted that since January to June 25, 2011 as many as 19 countries had gone to the international market but none could float the bond. “Why did the government waste millions of dollars when the result was written on the wall?” said Khan, who has previously managed bonds in the Shaukat Aziz regime.
For managing the issue, the government hired financial advisers in May comprising Citibank, JP Morgan, Credit Suisse and BMA at a hefty fee. These advisers should also shoulder the responsibility who gave a wrong advice, said Khan.
The government’s mismanagement can be gauged from the fact that the teams who went on roadshows were not part of the initial consultative process. One member managed to get his visa at the eleventh hour while the other one protested over choosing a wrong time to go into the market, sources said.
The PC spokesman said the government would continue to review its options for entering the international market at an appropriate time. He said the government intended to complete the transaction within the previous fiscal year, but financial markets became extremely volatile by the end of the year due to the Greek crisis and weak US economic data.
He said the Cabinet Committee on Privatisation had decided on holding investor meetings in the third week of June in Hong Kong, Singapore and London. These meetings were not roadshows for any specific transaction and no terms for any transaction were shared, he argued.
A high-level government official, who went on these roadshows, contested the spokesman’s claim, saying “when we left for the United Kingdom it was a roadshow, but when we landed there we were told by the financial advisers that it was a non-deal roadshow.”
Published in The Express Tribune, July 5th, 2011.
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