KARACHI: The State Bank of Pakistan (SBP) on Thursday tried to defend the latest Eurobond issue, saying that while international borrowing has its limitations due to a rise in foreign debt, the country’s current external debt-to-GDP ratio is well below compared with its peers.

The government last week issued a 10-year $500 million Eurobonds in the international market at a cost of 8.25pc.

The issue has attracted severe criticism by independent economists who termed it untimely, costly and needless at this stage when the foreign exchange reserves are well above $18 billion.

“While it may be considered as relatively expensive compared with the past issues, it has many associated benefits. Foremost, it is helpful to maintain the current year’s budgeted cash flows and meeting many of the performance criteria set under the IMF programme,” the SBP in a press release.

The SBP admitted that the foreign exchange reserves are adequate from external sector sustainability viewpoint, but added that continuing with such trend is important since availability of adequate reserves support in attracting both debt and non-debt inflows of foreign exchange.

The time of issuing the bond was widely criticised but the State Bank believes that a delay would have only added to the cost of raising the bond.

“The diminishing uncertainty over time will increase the likelihood of a rise in US interest rates that would only reduce the interest in other developing countries’ papers,” it added.

Published in Dawn October 2nd, 2015

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