The government has entered the foreign capital market again this year by floating a five-year Sukuk and a 10-year Euro bond, raising $2.5 billion in one go –at least $1 billion through the Sukuk and $1.5 billion through the Eurobond. The bids received in New York for the two bonds stood at $8 billion though the yields were lower as compared to the last year’s foray when the government had raised $1billion through a five-year Sukuk at 410 basis points above the five-year US treasury bill, but that spread was 365 basis points this time around. The yield on the 10-year bond is also downed by 1.6 percent from the last 10-year paper. As the government has comfortably raised the money despite political chaos in the country, it is no doubt boasting of its success as the single largest auction of debt came to a close without delay.The money will definitely bolster the declining foreign exchange reserves, but this kind of venture is normal in an economy where acquiring the new debtshave always been taken as a priority. Though the short term policies have long term repercussions, the bonds will put on hold the imminent devaluation of the Pakistani rupee.
Economists suggest the country had little options to ensure sufficient non-debt inflows and had to explore the global debt markets as the domestic exports declined by 25 percent during the four-year tenure of the Pakistan Muslim League-Nawaz government. The current exports stand at $20.4 billion which is only 6.7 percent of over $304 billion economy. The government opted for the international bonds and commercial loans to raise $13.7 billion in four and half years, including $6.64 billion it acquired through expensive foreign commercial loans and $7 billion through Sukuk and Eurobond notes. The is the state of the economy which beleaguered Finance Minister Ishaq Dar is not tired of praising day and night.
The government has reportedly acquired $35 billion loans in total during its four and half year tenure and in the absence of check and balance, no one knows how the money was spent under which head. However, the generations have to pay back the debts. The country has an uphill task of debt servicing in near future which is piling up with acquisition of funds from every available source. When will mismanagement of the economy stop is a million dollar question.
