ISLAMABAD: Federal Minister for Finance and Revenue Hammad Azhar said that Pakistan successfully concluded its first-ever three-tranche capital market transaction.
In a tweet, the minister said that with five, ten and thirty years Eurobonds at 6 percent 7.375 percent and 8.875percent, leading global investors showed great confidence in our country’s economy and future outlook.
“Pakistan has very successfully concluded its first ever 3-tranche capital market transaction yesterday. With 5, 10 and 30 year Eurobonds at 6%, 7.375% and 8.875%, leading global investors showed great confidence in our country’s economy and future outlook,” the federal minister tweeted.
Pakistan has borrowed $2.5 billion through Eurobonds by offering very lucrative interest rates to lenders aimed at building foreign exchange reserves that remain fragile due to mounting external debt payments in absence of non-debt creating inflows.
The government agreed to pay interest rates in the range of 6% for five-year maturity bonds. For 10-year maturity bonds, the country will pay 7.375% interest and 8.875% for 30-year bonds.
It is the first capital market transaction carried out by Pakistan in the last almost three-and-a-half years. The interest rates were relatively higher than initial expectations, indicating that investors charged a higher risk premium.
Compared with short-term expensive commercial borrowing, the long-term bonds are considered the preferred choice of instruments due to their longer maturity and no conditions attached.
The government has agreed to pay interest rates which were 5.2% to 6.5% higher than the prevailing US Treasury rates despite an overall low global interest rate environment.
The government received $5.3 billion worth of bids, which were nearly 165% higher than the requirement indicated to the investors. It has raised $1 billion through five-year bonds at 6% interest rate, which was 5.23% higher than the US benchmark rate.
Another $1 billion was raised for 10 years at 7.35%, which was 5.6% higher than the 10-year US Treasury rate. Similarly, $500 million was borrowed for 30 years at 8.875% interest rate – 6.5% higher than the corresponding US rates.
The government has paid a price that is also higher than the current yield on Pakistan bonds maturing in 2027 and trading in the secondary market at around 5.9%.
Pakistan has entered into global capital markets after over three years. This is the first global market transaction being carried out by the Pakistan Tehreek-e-Insaf (PTI) government.
