'Global investors show keen interest in Pakistan's economy, future outlook'

Pakistan successfully concluded its first-ever three tranche capital market transaction, the finance minister adds

Newly appointed Finance Minister Hammad Azhar expressed satisfaction on Wednesday over the interest shown by the leading world investors in the Eurobonds pitched by Pakistan.

"Pakistan very successfully concluded its first-ever three tranche capital market transaction yesterday with 5, 10 and 30 year Eurobonds at 6%, 7.375% and 8.875%," the minister said in a tweet.

He further added that leading global investors showed great confidence in our country's economy and future outlook.

Pakistan has very successfully concluded its first ever 3-tranche capital market transaction yesterday. With 5, 10 and 30 yr Eurobonds at 6%, 7.375% and 8.875%, leading global investors showed great confidence in our country's economy and future outlook.

— Hammad Azhar (@Hammad_Azhar) March 31, 2021

Earlier, it was reported that Pakistan borrowed $2.5 billion through Eurobonds by offering very lucrative interest rates to lenders aimed at building foreign exchange reserves that remain fragile due to mounting external debt payments in absence of non-debt creating inflows.

The government agreed to pay interest rates in the range of 6% for five-year maturity bonds and 8.875% for 30-year bonds, according to details released by the financial advisers. For 10-year maturity bonds, the country will pay 7.375% interest, they added.

Read more: Pakistan borrows $2.5b via Eurobonds

In the past one week, the government has borrowed $4.4 billion from the International Monetary Fund (IMF), the World Bank and global capital markets.

It is the first capital market transaction carried out by Pakistan in the last almost three-and-a-half years. The interest rates were relatively higher than initial expectations, indicating that investors charged a higher risk premium.

Compared with short-term expensive commercial borrowing, long-term bonds are considered the preferred choice of instruments due to their longer maturity and no conditions attached.

The World Bank said on Tuesday that Pakistan’s public debt exposure-related risks remain “elevated” and the country’s total public debt would mount up to 94% of gross domestic product (GDP) by the end of current fiscal year.

The government has agreed to pay interest rates which were 5.2% to 6.5% higher than the prevailing US Treasury rates despite an overall low global interest rate environment.

The government received $5.3 billion worth of bids, which were nearly 165% higher than the requirement indicated to the investors.

The country raised $1 billion through five-year bonds at 6% interest rate, which was 5.23% higher than the US benchmark rate.