Dual-tranche Euro bond

Pakistan's forex reserves got a shot in the arm as the country raised $3 billion through a dual-tranche Eurobond. This unprecedented success comes on the heels of renewed confidence exhibited by lenders in macroeconomic reforms and the stringent implementation of the IMF's programme. It is the largest single international capital market transaction achieved from a broad and diversified base of institutional investors across global markets and continents. The breakdown of the issuance includes $1.75 billion through a 5.5-year bond at a coupon rate of 7.5 per cent, and $1.25 billion through a 10-year bond at 7.9%.

After almost a decade, Islamabad has been able to float and sell its sovereign paper commitments in the market at a half-percentage-point lower interest rate. Panda Bonds to the tune of $500 million and the Global Medium-Term Note initiative have been other success stories, alongside the fact that the government has been able to settle maturities in due time. This confidence in the currency market must now serve to reassure investors that Pakistan is a preferred geopolitical destination for big-ticket businesses.

Pakistan has proven that it can mobilise long-term financing, as is evident from the 10-year Eurobond. This development, however, coincides with the bitter truth that the country's total debt has crossed Rs100 trillion, raising doubts about its stabilisation efforts. Had it not been for remittances from expatriates and the financial succor from the Gulf States and China, the balance sheet would have been terrible. Facing heavy debt repayments and cuts in developmental outlay, Pakistan has been struggling with a fiscal deficit of around 5% of GDP and a growth rate of less than 3% over the last three years.

The way forward is to manage debt accumulation by generating plausible new avenues of income and tapping into export markets. At the very least, there is an urgent need to recraft the economic model to bridge the financing gap. Tapping the bond market, as and when required, is a healthy sign for reigniting confidence with global financial institutions.