ISLAMABAD-The Asian Development Bank (ADB) has raised Rs1.83 billion ($11.4 million) in a first issue of local currency karakoram bonds by a multilateral development bank of which Pakistan is a member. A karakoram bond is an offshore bond denominated in Pakistan rupees and settled in US dollars, listed on a major stock exchange and settled through an international central securities depositary.
The international bond issue pays a 7.50 per cent semi-annual coupon and matures in August 2023. The bonds were arranged by Citigroup Global Markets and sold to European asset managers. The net proceeds from the sale of the bond issue will be included in ADB’s ordinary capital resources. Previously, ADB had no local currency loans in Pakistan, but this option will be offered in future projects as an alternative to dollar borrowing. It is anticipated that ADB’s local currency loans will be a boost to private sector development in Pakistan.
“Engineering local currency solutions is both an art and a science,” said ADB Treasurer Pierre Van Peteghem. “Not only must we marry investor demand with market conditions to achieve optimal currency and interest rates, but we must also dedicate time and resources to a close dialogue with the government to achieve the best possible outcome.”
“The Pakistan rupee-linked karakoram bond floated by ADB is an excellent initiative. I am confident it will have significant mutually beneficial outcomes for Pakistan and ADB,” said Adviser to Pakistan’s Prime Minister on Finance and Revenue Abdul Hafeez Shaikh.
State Bank of Pakistan Governor Reza Baqir congratulated the ADB team and affirmed his appreciation of ADB’s support for Pakistan’s financial and economic development. “ADB’s inaugural issue of Pakistan rupee-linked karakoram bonds will help deepen the capital markets of Pakistan while channeling funding to vital economic sectors,” he said.
ADB appreciates the support provided by the State Bank of Pakistan to facilitate coordination with the government to successfully start this program. ADB is a regular borrower in the mainstream international bond markets. It has also led issuances in developing Asian countries as part of its efforts to promote local currency bond markets as an alternative to bank lending. ADB has already issued local currency bonds in Indian rupees, Kazakhstan tenge, and Mongolian togrog in 2020.
In other development, the ADB Vice President Shixin Chen reaffirmed ADB’s support for Pakistan’s development efforts and coronavirus disease (COVID-19) pandemic response during a series of virtual meetings with senior Pakistan government officials.
In a series of meetings from 27 October to 17 November, Mr. Chen met with Adviser to the Prime Minister on Finance and Revenue Abdul Hafeez Shaikh, Federal Minister for Economic Affairs and ADB Governor Makhdoom Khusro Bakhtiar, Pakistan’s Minister for Planning, Development & Special Initiatives Asad Umar, Federal Minister for Energy Omar Ayub, Governor of the State Bank of Pakistan Reza Baqir, and Special Assistant of Pakistan’s Prime Minister and Federal Minister for Poverty Alleviation and Social Safety Protection Sania Nishtar, among other senior officials and development partners.
“ADB and Pakistan have a long-standing development partnership having worked together to confront various challenges and emergencies,” said Mr. Chen. “Our swift and robust response to Pakistan in combating the COVID-19 pandemic has further strengthened this partnership. We will continue to work closely with the government, development partners, and the private sector to assist Pakistan, including through our forthcoming five-year country partnership strategy. This will support the post-COVID-19 economic recovery, help to resume and strengthen reform programs, and implement the country’s development agenda.”
Mr. Chen discussed ADB’s project portfolio performance, support for COVID-19 response, and development priorities with Mr. Shaikh, Mr. Bakhtiar, and Mr. Umar. They underscored the importance of measures being taken by the government to improve the readiness of processing and implementation of development projects and highlighted the value of ADB’s support for policy reforms and regional cooperation.
Mr. Chen discussed energy sector reforms with Mr. Ayub, while Ms. Nishtar highlighted ADB’s swift assistance through the flagship Ehsaas program. Mr. Chen also discussed central bank’s stabilization measures, ADB’s ongoing financial sector programs, and strategies to stimulate economic recovery with Mr. Baqir.
Mr. Chen also held consultations with key development partners including World Bank Country Director for Pakistan, Resident Representative of the International Monetary Fund, Head of the UK Foreign, Commonwealth and Development Office in Pakistan, Mission Director to Pakistan of USAID Pakistan, and representatives of the US Embassy to Pakistan.
As part of the series of meetings, Mr. Chen also participated in a micro, small, and medium-sized enterprise-themed roundtable and engaged with the regulator, bankers, and entrepreneurs to discuss strengthening business and job opportunities for rapid post-COVID-19 recovery.
ADB has provided significant support to Pakistan’s COVID-19 response. This includes a $500 million loan approved in June to help the Government deliver social protection programs to the poor and vulnerable, expand health sector capabilities, and deliver a pro-poor fiscal stimulus to boost growth and create jobs. In May, ADB approved a $300 million emergency assistance loan to strengthen Pakistan’s public health response to the pandemic and help meet the basic needs of vulnerable and poor segments of society.