IN a first initiative of its kind, Prime Minister Imran Khan’s administration has launched a diaspora bond, Pakistan Banao Certificate, to tap into the foreign savings of Pakistani nationals living overseas as part of its plan to avert a balance-of-payments crisis. The offer will be valid for five months to June 30 and the government is hoping for an enthusiastic response from the targeted investors, particularly those based in North America, Britain and Europe with ‘deep pockets’. But many think the project is unlikely to fetch the kind of cash the government is expecting it to generate. After all, only a tiny fraction of the 8.5m Pakistanis living abroad contributed to the dam fund campaign the former chief justice had launched with so much fanfare to finance the Bhasha hydropower project. Critics say that the dam fund was rather naively modelled on how donations for welfare schemes are collected. The example of the money collected by the Shaukat Khanum Hospital is cited as Mr Khan’s own, very successful project. These comparisons are, however, flawed because the expats, who send back $20bn or almost 80pc of our total export revenues every year, got no exemptions on donating money for the dam as is the case with donations made to charity. Again, it would be foolish to compare the dam fund campaign wherein the Pakistani diaspora was called upon to pay for the scheme from their pockets and the dollar-denominated PBCs that offer a highly attractive return of 6.25pc and 6.75pc on three- and five-year maturities.

These are quite attractive bonds. The offered rates compare with coupons of 2.49pc and 2.88pc on US bonds, and 3.5pc and 4pc on Saudi papers of the same maturities. Moreover, the profit on the certificates will be tax-free and the buyers will get 1pc premium on final payment if encashed in Pakistani currency. Besides raising cash to support the deteriorating balance-of-payment situation, the government says the diaspora bond is just one of the many instruments it is developing to create investment opportunities for overseas Pakistanis. Two more financial instruments will be rolled out in the next few weeks and a $500m fund is also planned under the Board of Investment. Thus, it is safe to assume that the diaspora bond will bring in a respectable amount even if the target is not met. 

Published in Dawn, February 4th , 2019