ISLAMABAD, June 20: Pakistan is considering issuing its first foreign currency bond since its only foray into the international capital market in 1997, Finance Minister Shaukat Aziz told London’s Financial Times newspaper.

The bond would be worth up to $500 million, Mr Shaukat said in an interview published on Friday.

With Pakistan’s foreign exchange reserves brimming healthily at a record $10.5 billion, the bond is not aimed at attracting dollars.

“We don’t need the cash flow, but we are keen to keep investor interest in Pakistan alive,” Mr Shaukat, a former Citibank executive, was quoted as saying.

He told the newspaper a new debt office within his ministry was gauging the appetite among international banks and investors for such a bond.

Pakistan’s first foreign currency bond, a 300 million dollar eurobond, was launched in 1997 when it was in dire need of foreign exchange supplies.

The Islamic republic’s credit rating fell drastically after it conducted tit-for-tat nuclear tests with India in 1998, as it found itself on the verge of defaulting on foreign loan repayments.

Dazzling macroeconomic performances in the past two years, aided by extensive debt rescheduling and write-offs as well as a series of reforms under President Pervez Musharraf have sent its credit rating back up from SD in 1999 to B, according the latest grading from credit rating agency Standard and Poor’s.

Pakistan’s presence in the foreign capital market will help it attract foreign portfolio investment, Jahangir Siddiqui and Co market analyst Tanvir Abid said.

Mr Shaukat had previously indicated Pakistan might launch bonds in foreign markets as a “kind of image building exercise,” Mr Abid said. “The freezing of foreign exchange accounts and the low credit rating virtually drove it out of the foreign capital markets following the 1998 events,” he told AFP.

“Now that Pakistan enjoys good relations with the US and tensions with India have subsided, the issuance of bonds will help the inflow of portfolio funds.”—AFP