LONDON: Pakistan sovereign dollar-bonds rose as much as 1 cent on Monday, building on last week’s gains in the wake of the government striking a last minute $3 billion financing deal with the International Monetary Fund (IMF).

The bonds have notched up sharp gains after the government said on Friday it had secured a short-term financial package from the fund, giving the cash-strapped South Asian economy a long-awaited respite as it teeters on the brink of default.

The 2024 and 2025 bonds saw the biggest gains, both adding just over 1 cent to trade at 72 cents and 55 cents on the dollar respectively, Trad­eweb data showed. The 2024 issue is at its highest since August 2022 and has doubled from its trough of around 37 cents hit in October.

Analysts said the agreement with the IMF, which comes ahead of the country’s general elections due by November, had excee­ded their expectations.

“We believe the IMF financing arrangement provides breathing room for the country during the upcoming election period while lowering the risk of a payment halt,” Avanti Save at Barclays wrote in a note to clients published on Monday.

Barclays said it upgraded its outlook on Pakis­­tan’s sovereign-dollar bonds to ‘market wei­ght’ from ‘underweight’, and recommended buying the 2025, 2026, 2027 and 2031 maturities. Those issues still traded at prices much lower than other non-defaulted emerging market peers and below the bank’s recovery estimates in the case of a reprofiling, Barclays added.

Published in Dawn, July 4th, 2023