Pakistan to float Eurobonds, Sukuk through MTN

Ministry invites proposals from financial institutions for programme

ISLAMABAD: The finance ministry has decided to introduce a medium-term note (MTN) programme to float Eurobonds and international Sukuk for a period of one year in an attempt to increase the foreign reserves of the country.

The ministry has invited financial institutions to submit their proposals to work as financial advisers, responsible for the registration, structuring, and execution of the programme.

The interested institutions will have to submit their technical and financial proposals in two separate envelopes by October 14.

The proposals will include recommendations for the volume of the programme, the duration of the bonds, the inauguration time, the expected coupon and rental rate, and the format and structure of the issuance of the Eurobonds and Sukuk.



The ministry wants to hire the services of two separate consortia for the Eurobonds and Sukuk comprising five financial institutions each. The consortium for the Eurobonds will comprise five conventional banks and it will assist in the issuance of the bonds.

The second consortium, which will assist in the issuance of Sukuk, will have five financial institutions including at least two Islamic financial institutions.

The process will take place through open bidding for transparency.

The government plans to raise $3 billion by floating Eurobonds and Sukuk.

On September 13, the foreign currency reserves held by the SBP were recorded at $8,600.4 million, up $138 million compared with $8,462.3 million in the previous week.

Overall, liquid foreign currency reserves, held by the country, including net reserves held by banks other than the SBP, stood at $15,898.1 million. Net reserves held by banks amounted to $7,297.7 million.



Pakistan received $1.5 billion or Rs237 billion worth of foreign loans in first two months of the current fiscal year, higher by 108% over the same period of the previous year, aimed at meeting the country’s financing needs.

Foreign disbursements have started picking up following signing of the International Monetary Fund (IMF) loan programme, which seeks $38 billion in foreign funding over three years to keep Pakistan afloat.

Bilateral and multilateral creditors and commercial banks disbursed $1.49 billion in loans in the July-August period of the fiscal year 2019-20, according to statistics compiled by the Ministry of Economic Affairs.

The disbursements were higher by $774 million or 108% compared with loans of $714 million received in July-August FY19.

In addition to loans of $1.5 billion, Pakistan also obtained $132.3 million worth of foreign grants from the United Kingdom, the United States, and Japan.



The $1.5 billion in loans were equal to 11.5% of the projected $13-billion borrowing that the Pakistan Tehreek-e-Insaf (PTI) government targeted to secure in the current fiscal year in a bid to meet current account deficit and debt repayment requirements.

In its first year in power, the PTI government had acquired $16 billion worth of external loans.

The financing requirement for the current account deficit has started going down but still, the government will need roughly $8 billion in this fiscal year to fill the gap. Pakistan’s gross external financing needs have been assessed at a minimum of $25.6 billion by the IMF for the current fiscal year. The assessment is based on the projected current account deficit of $6.6 billion in the year.