ISLAMABAD: The Asian Development Bank (ADB) has raised Rs1.83 billion ($11.4 million) local currency ‘Karakoram bonds’ and promised its continued support for Pakistan’s development efforts and Covid-19 pandemic response.

This is a first issue of local currency ‘Karakoram bonds’ by a multilateral development bank of which Pakistan is a member, said the ADB in a statement.

A Karakoram is an offshore bond denominated in Pakistan rupees and settled in US dollars, listed on a major stock exchange and settled through an international central securities depository.

The international bond issue pays a 7.50 per cent semi-annual coupon and matures in August 2023. The bonds were arranged by Citigroup Global Markets and sold to European asset managers, the statement said, adding the net proceeds from the sale of the bond issue will be included in ADB’s ordinary capital resources.

Previously, ADB had no local currency loans in Pakistan, but this option will be offered in future projects as an alternative to dollar borrowing. It is anticipated that ADB’s local currency loans will be a boost to private sector development in Pakistan.

“Engineering local currency solutions is both an art and a science,” said ADB Treasurer Pierre Van Peteghem. “Not only must we marry investor demand with market conditions to achieve optimal currency and interest rates, but we must also dedicate time and resources to a close dialogue with the government to achieve the best possible outcome.”

“The Pakistan rupee-linked Karakoram bond floated by ADB is an excellent initiative,” said Adviser to Prime Minister on Finance and Revenue Abdul Hafeez Shaikh, adding that it will have significant mutually beneficial outcomes for Pakistan and ADB.

State Bank of Pakistan (SBP) Governor Reza Baqir also appreciated the ADB’s team over the bond ADB’s support for Pakistan’s financial and economic development. “ADB’s inaugural issue of Pakistan rupee-linked Karakoram bonds will help deepen the capital markets of Pakistan while channeling funding to vital economic sectors,” he said.

The ADB appreciated the support provided by the SBP to facilitate coordination with the government to successfully start this programme. ADB is a regular borrower in the mainstream international bond markets and has also led issuances in developing Asian countries as part of its efforts to promote local currency bond markets as an alternative to bank lending. ADB has already issued local currency bonds in Indian rupees, Kazakhstani tenge and Mongolian togrog in 2020.

Meanwhile, the ADB’s Vice-President Shixin Chen reaffirmed full support for Pakistan’s development efforts and coronavirus disease (Covid-19) pandemic response during a series of virtual meetings with senior Pakistan government officials.

Published in Dawn, November 19th, 2020