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ISLAMABAD: Poor response by global markets to the Eurobond offering by Pakistan shows that unfortunately global investors remain unconvinced of the improved economy narrative that the present government has been trying to sell.
This was stated by MNA Asad Umar, head of Pakistan Tehreek-i-Insaf’s marketing, media and policy wing, in a statement issued on Monday. The extremely low level of foreign direct investment (FDI) being received by the country, he argued, was a vote of no confidence by global investors in the economic policies of the current government.
“FDI which had peaked at more than $5 billion a few years back was less than $1 billion in 2014-15,” he said.
The government in its latest offering last week was only able to sell Eurobonds worth $500 million at a yield of 8.25 per cent which is the same pricing it got last year when Pakistan had re-entered the international bond market after a gap of several years, he said.
Everything else remaining the same the pricing this time should have been lower as there was no re-entry premium to be paid. Hence, the markets are essentially saying that things are getting worse, Mr Umar said, adding that the comparison with recent bond issued by other emerging economies makes for shocking reading.
He said just two examples would suffice his argument. Kenya in its first-ever issue last year raised $1.5 billion at a yield of 6.875pc. Similarly, Sri Lanka just a few months back raised $650 million at a pricing of 6.125pc which is more than 2pc lower than what Pakistan is going to pay.
Mr Umar added that current account continued to run in deficit despite the record plunge in oil prices which was the single biggest import of Pakistan. Exports continue to decline and the drop in exports is starting to reach alarming proportions.
The energy sector crises is getting even worse with massive load-shedding with continued delay in new projects and non-performance of supposedly completed projects, no reduction in line losses and receivables reaching record levels and circular debt back to near record levels despite doubling of prices of electricity for business and consumers.
He substantiated his argument by citing latest ranking of the country at various international forums.
“Pakistan’s ranking in the World Economic Forum Global Competitiveness Index has dropped from 124th at the end of the Zardari era to 129th this year. The ease of doing business report of the World Bank dropped Pakistan from 107th to 128th.”
The combination of this eroding competitiveness and the piling of exorbitantly expensive debt is sinking Pakistan further into a debt trap imperiling future generations of the country, he added.
Published in Dawn, September 29th , 2015
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