Pak issues over USD 1 billion in Islamic bonds

Cash-strapped Pakistan today said it has issued USD 1 billion from international debt markets by issuing five-year dollar-denominated Islamic bonds to offset pressure on its balance of payments and return foreign loans maturing this year.
Finance Minister Ishaq Dar said that Pakistan received nearly USD 2.4 billion in total offers from foreign investors.
The five-year bond has been issued at a profit rate of 5.5 per cent, the Dawn newspaper reported.
The rate is lower than the price the country paid two years back for raising USD 1 billion through the same instrument.
With the fresh borrowings, the PML-N government has so far issued Eurobonds and Sukuk worth over USD 4.5 billion during its three-year tenure.

It decided to raise the fresh debt to buffer the reserves ahead of some major loan repayments during the second half of this fiscal year. The Paris Club debt payments are also maturing by end of this fiscal year.

The government went to raise debt ten days after the expiry of three-year USD 6.2 billion International Monetary Fund (IMF) programme. The money has been generated through non-conventional means after the government last week said that, "the trade account has been worsening and consequently pressures are building on the balance of payments."
The government had granted ten types of tax exemptions on the Islamic bonds aimed at keeping the overall cost of borrowing relatively low.

The 5.5 per cent interest rate is 4.32 per cent over and above the benchmark five-year US Treasury rate. Very low interest rates in Western and European markets amid fears of global slowdown of economies have also increased interest in highly lucrative sovereign papers issued by developing economies, the Express Tribune reported.