Finance Division: the correct situation about Sukuk/Eurobonds
The article “Borrowing from global capital market” carried by Business Recorder on Nov 6, 2017, portrays an incorrect picture about issuance of Sukuk and Eurobonds.
At the onset, it is important to mention that the issuance of Eurobonds in the last four years is 2.5 billion dollar and 2.0 billion dollar Sukuk. The numbers given in the article are not correct.
The presence of a country in international capital market is a positive sign, which reflects on diversification of country’s debt portfolio and shows investors’ confidence in economic policies and political stability of the country. It also indicates trust of leading investors in debt sustainability of the country.
The issuance of bonds is part of annual financing plans and pricing is always determined according to prevailing market conditions. This is depicted from the fact that the last sovereign Sukuk was issued at a historic low rate of 5.5 percent.
The writer should be mindful that the recent affirmation of Pakistan’s ‘B’ long-term and short-term sovereign credit rating by Standard & Poor’s is the reflection of strong economic prospects, while external imbalances are temporary which will reverse in next two years.
The widening of current account deficit was mainly due to sharp surge in imports of machinery and fuels caused by robust domestic demand and implementation of energy and infrastructure related projects. The report also acknowledges that the higher than expected fiscal deficit in FY2017 was largely caused by higher than expected provincial spending and lower growth in tax revenue collection.
It is for the information of the writer that the negative trend in exports has bottomed out and government’s initiatives have shown positive results as exports have increased by 12.4 percent during July-September, FY2018 against a decline of 5 percent in the same period of FY2017 and workers’ remittances by 2.27 percent during July-October, FY2018 against a decline of 3.16 percent during the same period of FY2017.
FDI grew by 56.3 percent during July-September, FY2018 against the decline of 16.58 percent in the comparable period of FY2017. These bode well that the current account deficit will substantially improve in FY2018.
It is also worth remembering that Pakistan is facing low intensity conflict since last decade. The Government and the Armed forces have, after relentless efforts, dispelled the impression of a failed state, being professed by its neighbors. The conflict has, however, taken its toll in the form of country’s risk premium, which has raised the price of Pakistan’s issuance in this regard.
With the aforesaid positive aspect in mind, one cannot expect media to project negative image of the country on a consistent basis, despite receiving contrary evidence from credible international agencies, as this not only tarnishes the image of Pakistan but also jeopardizes any future issuance of the country in international capital markets.
Spokesman for Finance Division Islamabad
