November 12, 2003	Wednesday	Ramazan 16, 1424

ISLAMABAD, Nov 11: The government on Tuesday appointed JP Morgan and Deutsche Bank to act as lead mangers and ABN Amro as co-lead manager to issue Pakistan’s sovereign bonds amounting to $500 million.

“We believe that our decision to float these Eurobonds will auger well for foreign investment and economic growth,” said Finance Minister Shaukat Aziz.

He told Dawn that Pakistan had received a competitive price from the lead mangers to issue these bonds. However, he declined to give details, saying the purpose was to make the transaction attractive for everybody.

He said the government had received final presentations from all the four banks which were earlier shortlisted.

When asked why the government wanted a consortium of three banks, the minister said it was always good to have more than one bank for entering into a bond market. He cited the example of China that too has appointed two international banks to act as lead mangers for floating $1.5 billion worth of bonds.

“The standard practice is to have two banks having a wider base and global recognition and reach for floating bonds worth over $300 to $500 million,” he said.

Responding to a question, he said the next step would be to fulfil the legal requirements to arrange road shows and complete due diligence of the deal.

When asked why the government felt the need to float these bonds when foreign exchange reserves were as high as $11 billion, the finance minister said that China’s reserves today stood at $400 billion but it had gone into the bond market.

“But our reserves have been built essentially for meeting any unforeseen crisis or a catastrophe and not for consumption purposes,” he said.

Mr Shaukat said since Pakistan had been offered a better credit rating by Moody’s Investor Services from B3 to B2 and now Standard and Poor’s was also likely to give a similar rating, it was prudent to seek funds through bonds flotation.

According to an official announcement, the decision to issue bonds marked the return of Pakistan in the international capital market after the lapse of six years. This also reflects the significant improvement in Pakistan’s macro-economic situation.

Pakistan’s credit rating has recently been upgraded by Moody’s Investor Services in recognition of its improvements in overall economic situation in general and external balance of payments in particular.

This transaction, the announcement said, was specifically meant to establish bench marking in the international capital market as Pakistan’s foreign exchange reserves stands at $11.5 billion — sufficient to finance 11 to 12 months of imports.

Similarly, budget deficit is targeted to decline to four per cent of GDP this year, inflation is currently hovering around three per cent, exchange rate is stable, current account balance is in surplus, the burden of both external and public debt has declined substantially; exports, imports and tax collection are growing at double digit level, and growth which was 5.1 per cent last year is targeted at 5.3 per cent this year.