NEW YORK, July 29: Pakistan should enter the international bond market sooner rather than later before global interest rates, which are increasing, could make it more expensive to enter the market, Wall Street analysts here said on Tuesday.

The analysts noted that the most opportune time for entry into the global market was in June when Finance Minister Shaukat Aziz told investors on Wall Street about Pakistan’s intentions.

“Global interest rates in June were 3.45 per cent for a 10- year bond and now they yield 4.8 per cent,” noted the analysts, adding “Pakistan should always be there in the bond market.”

However, analysts underscore that even now the time is ripe for a quick entry into the global market as “the global rates we are seeing are at historical lows.”

“Although they (global interest rates) have begun to rise, but even now with rates this low, it is an opportune time to take advantage of this positive environment to lock in Pakistan’s funding for a longer term,” they noted.

“One does not know about global uncertainties, and whether our soft loan arrangements and good geo-political standing will persist. The first step to independence is self-reliance, and the first step to that is the ability to maintain secured avenues of funding,” they asserted.

One Wall Street analyst working with one of the biggest investment firms, noted that Pakistan has been cash-strapped for a major portion of its recent past. It’s heavy reliance on aid and loan arrangements from international donor organizations belies its insecurity in fulfilling its funding requirements.

“These lending agencies are extensions of foreign policies of the countries that finance them, so gaining access to such funds is contingent upon sacrificing one’s sovereignty in other areas (compliance with someone else’s dictates). The best example is Pakistan’s inability to gain loans and soft financing prior to the recent war on terror. Thus, these funds (IMF and World Bank loans) can be considered quite whimsical and thus uncertain,” he pointed out.

He asserted that “one needs to find independent sources of funding, and the international markets are by far the most efficient and competitive,” adding “also, issuing bonds allows Pakistan to borrow funds longer term, as opposed to rolling over short term debt. At the moment global rates are at an all time low and there is excess liquidity in the Pakistani market because of flow of remittances through official channels and movement of funds back into the country due to insecurity abroad after September 11th.”

When asked as to why it would be particularly important for Pakistan to raise debt through bond issuance, he said: “Bonds are debt instruments which can provide flexibility for the financing of long-term investment projects, as well as, short-term financial needs.”

As to the advantages of borrowing via debt securities vs. credit/loans, he said:

— This helps to diversify your funding sources primarily from banks/international lending institutions to banks, insurance companies, pension funds and investment funds.

— It establishes your name in the international markets, thus assisting in PR and publicity.

— Bonds and commercial papers can be rolled over easily.

— Given the depth of the market and the sizes that can be transacted, and established name can raise large funds without much slippage.

— In most cases of collateralized debt, the collateral is not frozen.

— Management of your debt portfolio is much easier, efficient and less costly. This is because one can buy back the bonds on the market if yields drop and there is existing old and expensive debt (there are no fees involved in cancellation as is the case with bank/institution loans).