ISLAMABAD-The government is working to issue bonds in international market to increase its foreign exchange reserves, which had started declining due to heavy loan repayment. After completion of all required formalities, the international capital markets will be tapped during January/February 2021, the ministry of finance said. The ministry had already initiated the process for engagement of Financial Advisors, which is expected to be completed by mid-November 2020. After completion of all required formalities, the international capital markets will be tapped during January/February 2021. 

“We have not projected how much revenue will be generated from the auction of bonds, as government would decide after reviewing the market situation,” said an official of the ministry of finance while talking to The Nation. He further said that, yields on Pakistan’s international bonds have returned to pre-Covid levels and these bonds are trading at a premium level, indicating the confidence of global investors in Pakistan’s economy.

It is worth mentioning here that Pakistan’s foreign exchange reserves had started depleting due to the repayment against previous loans. The country had paid around $1.4 billion as loan repayment in last three weeks, according to the data of State Bank of Pakistan (SBP). Foreign exchange reserves held by State Bank of Pakistan had declined by $342 million during week ended on 25-September-2020. Later, the reserves had further tumbled by $580 million in the week ended on 02-October-2020. However, the inflow of $300 million from Asian Development Bank (ADB) had helped the SBP in maintaining its reserves.  During the week ended 9-October-2020, the SBP made external debt repayment of $507 million.

The total liquid foreign reserves held by the country stood at $19,015.5million on 9-October-2020. Foreign reserves held by the State Bank of Pakistan are $11.798 billion and net foreign reserves held by commercial banks are $7.217 billion. The reserves would remain under pressure during current fiscal year due to the loan repayments. According to the ministry of Economic Affairs, Pakistan has to repay $10.363 billion against previous loans and interest payment during current fiscal year 2020-21. Of which, $8,338 million (82 per cent of total external public debt servicing) was repaid as principal and $1,802 million (18 per cent) as interest on the outstanding stock of external public debt.

The government would have to take foreign loans including issuing bonds in international market to maintain the foreign exchange reserves of the country. Pakistan had already borrowed $2.25 billion loan from multilateral and bilateral sources in first two months (July and August) of the current fiscal year. The latest data of Ministry of Economic Affairs showed that, the government has received $2.25 billion external inflows external inflows from multiple financing sources on July to August period of the year 2020-21, which are 18 per cent of annual budget estimates. In Annual budget 2020-21, the federal government had budgeted to borrow $12.23 billion for the entire current fiscal year from multilateral and bilateral sources and banks.