KARACHI, Feb 25: The real tie is between three foreign banks for getting contract from Pakistan to swap the fixed interest rate of the country's $500 million bonds with a floating rate. The banks are Citibank, ABN Amro and Standard Chartered.

Sources close to the ministry of finance told Dawn that the government had received bids from half a dozen foreign banks and was busy evaluating them, but the real tie is between these three banks.

"I do not say the others are not serious, but apparently three banks are in a close tie," a senior official of the ministry confirmed to Dawn on the condition of anonymity.

He said the Debt Management Cell of the ministry would evaluate the bids and would seek technical expertise of the State Bank for the purpose. He said the bids would be finalized in the first half of March.

The official said the primary reason for these thee banks competing hard for securing a contract to swap interest rates of Pakistan eurobonds was that these banks take an almost equally positive view of Pakistan economy. The bids for interest rate swaps have come from the principal offices of the banks interested in it and not from their offices operating in Pakistan.

Pakistan launched five-year $500 million eurobonds earlier this month at a fixed coupon rate of 6.75 per cent. It now wants to enter into interest rate swap with a foreign bank or financial house to reduce this rate.

The prevailing market rates are such after the interest rate swap Pakistan would be able to reduce its cost of borrowing through eurobonds by two percentage points or even more.

Whereas it would pay the investors the promised coupon rate of 6.75 per cent the bank or financial house with which it would strike a deal for interest rate swap would make a notional borrowing of these bonds at 4.75 per cent or even less.