Pakistan braces for $1.5bn payout as two bonds mature in next fiscal year

• Govt considering launch of various international bonds in next fiscal.
• Success of planned bond issuances depends on prevailing market appetite.
• High interest rates could pose challenges to Pakistan's borrowing plans.
  

ISLAMABAD: Pakistan's upcoming budget for the fiscal year 2025-26 is projected to see a significant jump in external debt repayments as it will be required to clear two major Eurobond obligations, totalling $1.5 billion, upon maturity this year.

Faced with these mounting debt servicing requirements, Islamabad is actively exploring options to re-enter the international capital market.

The government is considering launching various international bonds in the next fiscal year, including Eurobonds, Sukuk, and potentially Panda bonds.

However, the success of these planned bond issuances will heavily depend on the prevailing market appetite and the mark-up rates in the United States and other global financial hubs.

Unfavourable market conditions or high interest rates could pose challenges to Pakistan's borrowing plans.

Following the successful completion of the first review of its current loan programmes with the International Monetary Fund (IMF) and the subsequent release of the second tranche of funds, Pakistan anticipates a further improvement in its credit rating from international rating agencies.

The government made efforts to launch a Panda bond in the outgoing fiscal year but failed to deliver. There are increased requirements to enter the Chinese market, so the Panda bond is expected to be launched in the next fiscal year with a first issuance of $200 to $250 million.

"There are two major repayments that will become due on the maturity of Eurobonds, one will be due in September 2025, worth $500 million, which was launched for 10 years, backed in 2015 at the rate of 8.25%," top official sources confirmed to The News on Wednesday.

"The second repayment will become due on the maturity of Eurobond worth $1 billion, which was launched in April 2021 at the rate of 6% for five years." 

Total external debt and liabilities are still being worked out, although the budget-makers are engaged to firm up figures on total dollar inflows and outflows on account of foreign loans and grants. 

In this ongoing week, the Economic Affairs Division and Ministry of Finance high-ups continued consultations to workout total dollar inflows in the shape of programme and project loans and outflows as external debt servicing but one thing was clear the external debt servicing might go up keeping in view two heavy repayments owing to maturity of Eurobonds.

 Another debt repayment for an international bond which was launched in April 2021 worth $1 billion would be matured in 2031 as this international bond was issued at the rate of 7.3%. 

The government had launched another international bond in January 2022 to generate $1 billion for seven years and it would be matured in 2029.