Pakistan To Hold Road Shows For $500m Sukuk Issue Next Week

ISLAMABAD: The Finance Ministry will attempt to tap international investors for the first time since political unrest hit the country and will hold road shows for a dollar-denominated Sukuk later this month, a top government official said on Monday.

“We will start from $500 million and the size of the bond can be increased if more and attractive offers are received for our upcoming Sukuk,” the official, briefed a group of senior journalists. “The country has prepared IM (Information Memorandum) for potential investors and three road shows would be arranged,” the official added.

The investors meeting will be held in Dubai on November 23 before one in Singapore on November 24 and a meeting in London on November 25. Citigroup, Deutsche Bank, Dubai Islamic Bank and Standard Chartered have been mandated to run the Sukuk issue. The official expects the country is likely to attract investor interest because of high appetite for Sukuk all around the world and that would also support the demand for Pakistan’s offering. The country has no global Sukuk outstanding.

The government has yet to announce the maturity for Sukuk, but the market predicts a 10-year Sukuk would probably yield from 7.25 to 7.5, while a five-year note will pay from six percent to 6.5 percent. Analysts said worldwide sales of Islamic bonds have dropped 81 percent last quarter to $2 billion, while issuance climbed 11 percent in 2014 to $38.9 billion, showing huge demand for the Islamic papers. Pakistan last tapped the international debt market in April, when the country had successfully launched a Eurobond in April in two $1 billion tranches to build up its much-needed foreign currency reserves.

On the expected release of $1.1 billion tranches under the International Monetary Fund (IMF) bailout package, the official said the IMF’s executive board will meet on December 17 to approve next tranche for the country. The IMF, last year, help Pakistan to avoid a possible default by agreeing to lend a $6.8 billion bailout package over three years.

The official said Pakistan would make efforts to increase its foreign exchange reserves up to $15 billion by the end of December 2014, with or without being part of the IMF programme, to meet funds obligation of three months import bill.

“The accumulation of reserves is necessary for the country’s economy,” said the official. A depleting reserve indicates economy’s weakness so the government as well as the central bank wants to build up the reserves, official said. “The IMF has never talked about devaluation of rupee against the dollar, however the Fund staff did talk about Real Effective Exchange Rate (REEF) and prepares their own estimates in accordance with different formulas,” said the official.

The top official said the consensus on the economic agenda is imperative as political sit-ins in Islamabad, court orders and soft oil prices at the world markets foiled attempts to generate $850 million through divestment of OGDCL shares. The official, when asked on net increase in external debt by $5 billion in one year by the PML (N) government, explained that the country had paid back highest amount to the IMF on the account of previous loan obtained during the PPP regime in the same year when it borrowed maximum.

The public debt to GDP ratio stood at 64 percent of GDP on June 30, 2014 but it was expected that the public debt in terms of GDP ratio would be coming down in years ahead, he added.

Originally published on www.thenews.com.pk