$500m payment to Eurobond investors authorised

E-Paper | October 29, 2026

$500m payment to Eurobond investors authorised

Khaleeq Kiani Published March 28, 2016

ISLAMABAD: Finance Minister Ishaq Dar authorised on Sunday payment of $500 million to Eurobond investors on March 31.

The 10-year bond was floated in 2006 by then prime minister Shaukat Aziz. It is maturing on March 31 and, hence, due for payment. It carried an interest rate of 7.125 per cent.

The authorisation by the finance minister came following his back-to-back meetings with the governor of State Bank of Pakistan (SBP) and the secretary of Economic Affairs Division (EAD) over the weekend.

The 10-year bond will mature on March 31

The authorisation would enable the EAD to instruct the central bank to clear payments to bond holders on the due date.

An official announcement said that the finance minister had issued directives to the EAD to “ensure timely repayment for retiring” the bond and pass necessary instruction to the SBP in this regard. The “retiring of the Eurobond liability will also result in the reduction in the country’s external debt stock by $500 million”.

An official of the Ministry of Finance said that the payment would not reduce the country’s foreign exchange reserves for more than a few days because of an upcoming disbursement of about $503m by the International Monetary Fund.

However, the government will have to raise about $3.5 billion from the international capital market, mostly by issuing dollar-denominated Eurobonds in almost three years to honour international repayment obligations, according to medium term (2016-19) debt management strategy (MTDMS) of the ministry.

Under the strategy, the government has to raise $1bn during current fiscal year, followed by $500m each in 2016-17 and 2017-18 and then issue another $2bn bonds in 2018-19 to replace maturing bonds.

Another official said that the government was currently in the process of examining the launch of a $500m bond by June this year to ensure that the reserves maintained a rising trend. But, he added, the government was flexible enough under the MTDMS to decide about the timing and size of each floating.

The government has so far attracted about $3.5bn in international bonds since coming to power in May, 2013. These bonds included $1bn Islamic Sukuk and $1.5bn of conventional bonds and $500m in September last year.

After the upcoming repayment, another $750m Eurobond floated by the Musharraf government in 2007 for 10 years at a mark-up of 6.75 per cent is due to mature next financial year.

Over the medium-term (2016-19), the debt management strategy estimates foreign inflows to be more than repayments. It put the annual inflows at an average of about $6.5bn a year against $4bn worth of external repayments.

Published in Dawn, March 28th, 2016

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Pakistan

Khaleeq Kiani is an Islamabad-based reporter for Dawn, specializing in political economy, governance, business, finance, macroeconomics and energy. He can be found on X at @khaleeqkiani.

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future

Mar 28, 2016 07:56am

Please share with us who are these Euro bond owners? We have a right to know.

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Abood

Mar 28, 2016 01:10pm

@future .This you should have asked Musharraf and imran khan in power at that time with musharraf.Not the present ruling. They are paying it off and will surely get another 500 million at cheaper rates.We should also ask musharraf how he made properties in emirates hills dubai when he was not paid that much.Emirates hills is quite expensive.

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Khalil Anwer Hassan

Mar 28, 2016 03:14pm

Maintaining hard core Foreign Exchange Reserves, generated as a result of exporting goods and services, Inward Remittances from Overseas Pakistani Workers (NRP) and/or attracting longer term Foreign Direct Investments, particularly in the shape of Capital Goods for Industrialization is totally different from Managing Liquidity for fulfilling Shorter-term Foreign Exchange needs of the country. While the former category requires competent economic planning and setting up the right priorities in terms of development goals, the latter, as undertaken by the Government of Pakistan, needs to somehow match the expected Forex outflows with the inflows, on a short term basis, irrespective of how, at what rate, from where and at what terms the needed Forex Inflows are acquired. This is an ad hoc method, which can not serve as a foundation for building a stable economic structure for the country.

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Salma Shahid

Mar 28, 2016 06:30pm

They will pay off the 500m bonds and they issue bonds worth 3,5bn. Going worse from bad.

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Mar 28, 2016 08:36pm

I am shocked to read the interest rate (7.125%) that Pakistan offered on Eurobonds. The interest rate in Europe is less than 1% these days and it was not that high 10 years back when the bonds were issued!

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M.Saeed

Mar 28, 2016 10:34pm

With our horrible credibility base, it is surprising how we get investors in our Euro-bonds of such magnitudes? Unless, our own Swiss-bank account holders are making the hay when sun shines!

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Just Someone

Mar 29, 2016 12:16am

@Abood: This govt. has raised even more expensive loans through Eurobonds at interest rates of 8.5% plus.

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I. Khan (Canada)

Mar 29, 2016 12:41am

I feel some thing fishy about this deal, every thing should be in open and we want to know who is keeping track of this huge transaction.

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AuK

Mar 29, 2016 04:16am

So in 10 years we paid an interest of over $350 million on top of the $500M that is paid back this week. And where was this money used - to pay off another debt? Our debt strategy is sure making us poorer by the day!

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