Pakistan May Raise $2.5 Billion as in Previous Bond Sale

(Bloomberg) -- Pakistan’s Minister of State for Finance Rana Afzal Khan said the government may raise the “same” amount of funds from global debt markets as it did at a $2.5 billion sale in November.

A final decision hasn’t been taken yet and the government is studying all options, Khan said in an interview on the sidelines of a conference in the capital, Islamabad, on Tuesday. Pakistan aims to issue bonds or Islamic-compliant sukuk before elections in July as it looks to boost dwindling foreign-exchange reserves and continues to invest in infrastructure projects, Khan told Bloomberg last month in Karachi.

Pakistan last issued dollar debt four months ago shore up its deteriorating finances. The country has been hit by political instability in the past year and its economy is showing increasing signs of vulnerability. Pakistan’s current account and trade deficits have widened as exports lag regional peers, while foreign-exchange reserves have dropped 27 percent to $12.3 billion in the past year.

“It will help cool off immediate pressure, more than a billion dollars a month is being depleted in reserves,’’ said Shahid Ali Habib, chief executive officer at Karachi-based brokerage Arif Habib Ltd. “It would have been better to raise a larger amount last time.”

The World Bank estimated in October that $17 billion of external financing -- or 5 percent to 6 percent of gross domestic product -- is needed in the current financial year through June for Pakistan to bridge its debt payments and current account deficit. Some analysts also believe the nation may need another International Monetary Fund bailout, which would be its 13th since 1988.

The IMF said last week said Pakistan faces continual “erosion” and its widening external and fiscal imbalances mean that “risks to Pakistan’s medium-term capacity to repay the fund have increased” since completion of a three-year $6.6 billion bailout program that ended in Sept. 2016. Pakistan’s current-account deficit could reach 4.8 percent of GDP in the year ending June, according to the IMF.

Miftah Ismail, Pakistan’s de-facto finance minister, said in an interview last week that Islamabad isn’t considering going back to the IMF, but is considering issuing Chinese currency bonds. The ruling party, whose leaders face multiple legal and corruption charges, will be loath to go back to the IMF so soon after the last program ended as it would indicate economic mismanagement.

Investors have also been cautious on Pakistan after the Supreme Court in July barred former Prime Minister Nawaz Sharif from office following a probe into his family finances. Pakistan’s benchmark stock index was the worst performer globally last year, though it has seen a measured rebound since.

To contact the reporter on this story: Faseeh Mangi in Islamabad at fmangi@bloomberg.net.

To contact the editors responsible for this story: Arijit Ghosh at aghosh@bloomberg.net, Chris Kay, Khalid Qayum

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