Parliamentary body calls representatives of banks
A parliamentary body has decided to summon representatives of three international banks, which the government hired for the purpose of issuing $500 million Eurobonds late last year, after it suspected that money invested by 'foreigners' had actually been flown in from Pakistan.
The Senate Standing Committee on Finance and Revenue decided to call the representatives after the government could not satisfy the parliamentarians about the nationality of those who invested in the dollar-denominated Eurobonds. The government on Wednesday gave the briefing during an in-camera meeting but did not give any material information, said a senator while speaking on condition of anonymity.
In September last year, the government had issued a $500 million Eurobond with a maturity period of ten years in the international market at an interest rate of 8.25%. The government had paid 6.12% over and above the US treasury rate for ten-year bond - a cost that highlighted investors' sentiments about the health of the country's economy.
However, the government's decision to go ahead with the issue despite unfavourable circumstances fuelled speculations that some dignitaries had availed the opportunity.
"We have information that some Pakistanis actually invested in the Eurobonds and the money flew from here," said Senator Saleem Mandviwalla, chairman of the standing committee after the meeting. He said that despite the information, Secretary Finance Dr Waqar Masood insisted that Pakistanis did not invest in the Eurobonds.
Mandviwalla said that in order to dig out the truth the committee decided to call the financial advisers that had been hired to carry out the transaction. He said the representatives of the Citibank, Deutsche Bank and Standard Chartered Bank were called to appear in the next meeting.
The chairman said that the financial advisers had the account details of those who invested in the Eurobonds. The Citibank and Deutsche Bank were also financial advisers for the last two bond offers when Pakistan raised $3 billion.
Mandviwalla said that the finance secretary told the committee that three Pakistani banks including Bank Alfalah and United Bank Limited also invested in the Eurobonds. However, Masood said that the off-shore branches of these banks invested in the bonds and money did not go from Pakistan. Roughly 14% of the $500 million were invested by Pakistani banks.
Masood said that State Bank of Pakistan regulates the foreign currency regime and only the central bank can tell whether some Pakistanis invested in the Eurobonds. The SBP representative was not present in the in-camera meeting.
The finance secretary said that the official circular for the transaction barred locals from investing in the bonds.
The committee members also expressed reservations over the source of remittances, arguing that a significant portion of it was actually black money that was being routed through remittances back into Pakistan.