ISLAMABAD: The government is set to launch a dollar-denominated diaspora bond – Pakistan Banao Certificate (PBC) – on Jan 31 to tap into the international savings of overseas Pakistanis for building foreign exchange reserves.
Finance Minister Asad Umar told Dawn that the certificates would be of two maturities – one of three years at about 6.25pc return and another with five-year maturity carrying 6.75pc return. Four banks had been selected to complete the transactions, he added.
Another official said the PBC would be launched worldwide jointly by the government and the State Bank of Pakistan. The rules governing the certificates were approved by the federal cabinet on Thursday because it was the first ever transaction of its nature that targeted only overseas Pakistanis.
“It will be an open-ended transaction and its size would depend on the response from Pakistanis abroad,” the official said adding that while the transaction would build reserves, the country’s balance of payments needs for the current year have already been secured. “Obviously we have some numbers in mind which could not be disclosed until the D-day,” he responded to another query.
“We don’t need to go for any other international capital market transaction this fiscal year,” the official commented when asked about $2.5-3 billion Eurobond or Islamic Sukuk launch in the international capital markets budgeted for the year.
Another official said that international markets needed an endorsement from the International Monetary Fund (IMF) which was elusive at this stage and hence the transaction could be expensive.
He said the first $1bn tranche from UAE out of $3bn commitment had been received along with the final $1bn instalment of Saudi Arabia’s $3bn promise already credited into the SBP account on Friday.
“More flows are expected over the next few days,” the official said, declining to go into details citing some sensitivities. He said a team of petroleum ministry was also leaving for Riyadh to sign off the Saudi oil facility worth $3bn.
Due for immediate payment in April this year are about $1bn bond acquired by the previous government five years ago. The PML-N had announced early last year to launch a similar bond that could not take off due to procedural delays amid political transition.
The PTI’s economic team had also planned the bond launch in October last year but delayed after Prime Minister Imran Khan’s call for donations to the dam fund.
Officials said the PBCs would be payable to the Pakistani investors in their accounts maintained abroad on semi-annual basis in foreign currency with the choice of local payments in local currency. The certificates would be issued to Pakistanis with computerised national identity cards and maintaining accounts abroad, national identity cards for overseas Pakistanis (NICOP) or Pakistan origin cardholders.
The instruments could be purchased individually or jointly by the resident and non-resident Pakistanis having bank accounts abroad but it would be mandatory that funds for purchase of certificates originate from their foreign accounts and remitted through official banking channels.
The certificate will be marketed on multiple platforms including digital, electronic and print media, starting from Monday (Jan 28) to ensure maximum outreach to potential investors. Further, road-shows, awareness sessions, etc will also be held for the overseas Pakistanis in the target countries.
Officials claimed that PBCs offer more attractive returns than those available to Pakistanis abroad on instruments of similar maturity. The certificates are backed by sovereign guarantee. Responding to a question, the official said PBC would not adversely affect normal remittances from overseas Pakistanis.
“This is a new avenue of investment for retail investors of Pakistani origin who could not normally avail traditional commercial or Islamic bonds of higher denomination,” the official added.
Published in Dawn, January 26th, 2019