ISLAMABAD: Pakistan has further delayed the launch of $3 billion worth of Eurobonds as interest rates and refinancing risks of external public and publicly guaranteed debt spike in the past one year due to reliance on expensive and relatively shorter-period foreign loans.
The government has now decided to delay the launch at least till the end of current fiscal year as it meets financing needs through short-term expensive foreign commercial loans and hot foreign money, being invested in the government debt securities.
“Due to availability of low cost external inflows from multilateral and bilateral sources, the government decided to issue Eurobonds later in the financial year,” said the Ministry of Finance in response to a question sent by Voice of Sindh.
The Pakistan Tehreek-e-Insaf (PTI) government has not yet tested the international capital market and has been delaying the launch of sovereign bonds, including Panda Bonds which it wants to float in China.
In budget estimates, the government had planned to raise $3 billion by floating sovereign bonds in fiscal year 2019-20. In the last fiscal year too, the government had also estimated raising $3 billion by floating sovereign bonds but dropped the plan due to delay in signing the International Monetary Fund (IMF) bailout programme.
The finance ministry had planned to launch at least $1 billion worth of Eurobonds in November but deferred the launch till the third quarter of current fiscal year. Now, it has further delayed the launch towards the later part of the fiscal year.
Government documents showed that during the past one year key external public debt-related indicators deteriorated due to overreliance on floating interest rate and expensive loans obtained from foreign commercial banks and the Asian Development Bank (ADB).
Non-concessionary external public loans amounted to $29 billion or 45% of the total public and publicly guaranteed debt by December 2018. However, these increased to $38.3 billion or 52% of the total external public debt as of December 2019, according to the Ministry of Finance statistics. There was a 7% increase in the share of expensive loans within a year, which was a worrisome trend.
