WASHINGTON, April 13: Pakistan plans to sell one billion dollars worth of bonds exchangeable into shares of a state-owned company as the government seeks to finance its budget deficit, says Finance Minister Ishaq Dar.

The minister, who is visiting Washington for the annual spring meetings of the World Bank, told a gathering at the Pakistan Embassy on Saturday evening that the previous government had borrowed Rs422 billion over and above the laid-down limit of Rs80 billion, thus widening the financial deficit.

Later, Ashfaque Khan, director-general of the debt management cell, told Dawn that Pakistan last week hired JP Morgan Chase & Company, Barclays Plc and ABN Amro Holding NV to manage the deal, the first since a 1997 issue.

Pakistan’s bonds will be exchangeable into shares of the state-controlled Oil and Gas Development Corporation. Shares in the Islamabad-based company, 85 per cent of which is owned by the government, have climbed 15 per cent in the past year. The company in February reported an 8 per cent gain in second-quarter profit, spurred by the surge in oil prices.

Pakistani officials are working with the banks on details including the size and terms of the offering, Mr Khan said. The government opted for these exchangeable bonds because they are less expensive than conventional or Islamic debt, he said.

Pakistan’s foreign-currency bonds are rated B+ by Standard & Poor’s and an equivalent B1 by Moody’s Investors Service, the fourth-highest non-investment, or junk, grade.

Meanwhile, the finance minister spoke of the need to expand Pakistan’s capability to produce nuclear energy to meet a serious energy crisis at home.

The United States is negotiating a deal with India to sell civilian nuclear power reactors to the country but has declined to make a similar offer to Pakistan because of the alleged involvement of its scientists in proliferation activities. But Mr Dar raised the issue again in the presence of a number of senior US officials at the embassy, indicating that Islamabad might renew its request to Washington to help it meets its energy needs.