Pakistan repays $1 billion international bond: SBP

Despite foreign exchange difficulties, Pakistan has successfully made timely repayment of foreign debt amounting to $ 1 billion on maturity of international bond on Friday, the State Bank of Pakistan reported.

The SBP executed the repayment of $1 billion (including principal and interest) on April 12, against a 10-year Eurobond, launched in 2014 and matured in April 2024.

The payment was made to the agent bank for onward distribution to the bondholders, the SBP said. This repayment has reduced the stock of the external debt acquired through the sale of Eurobonds and Sukuks in international markets below $7 billion mark.

Previously, despite facing a foreign exchange reserves crisis, Pakistan had made a repayment of Eurobond worth $1 billion in December. The State Bank of Pakistan (SBP) said the country has successfully executed the repayment of $1 billion Pakistan’s International Bond on April 12, 2024. The payment, which included principal plus interest, was made to the agent bank for onward distribution to the bond holders, the SBP added.

“After repayment of 2024 bond today, Pakistan's total outstanding international bonds/Sukuks are $6.8 billion (6.8% of public external debt) with the next maturity amounting to $500 million in September 2025,” shared Shahid Ali Habib, CEO Arif Habib Limited (AHL), in a post on Saturday. He said that in order to build the foreign exchange reserves, the government is also considering launching new international bonds.

Finance Minister Muhammad Aurangzeb has recently mentioned that efforts will be made to explore opportunities in the Chinese bond market, he added.

Pakistan’s foreign exchange reserves position has somewhat stabilised in recent weeks, with reserves held by the SBP having increased by $19 million on a weekly basis, clocking in at $8.04 billion as of March 29, as per the latest data. Total liquid foreign reserves held by the country stood at $13.38 billion. Net foreign reserves held by commercial banks stood at $5.34 billion.

With this payment, the SBP-held reserves will fall to around $7 billion, but Pakistan then expects an inflow from the International Monetary Fund (IMF).

However, on a positive note, the third and last tranche of the IMF SBA program amounted to $1.1 billion is likely to be released by the end of this month. The release of payment will help to build the sliding foreign exchange reserves of the country and enhance the capacity of external debt repayment. After completing the IMF SBA programme, Pakistan also needs another new full-fledged bailout program to maintain the foreign exchange reserves at a sustainable level.

According to the IMF, Pakistan has shown big improvement in its economy and is completing its current programme, however, there are some crucial issues that need attention. These issues include expanding the tax base, directing public spending effectively, and fostering transparency.

SBP Governor Jameel Ahmad had already said that Pakistan is out of default as full arrangements have been made for repayments of the external debts. However, he has urged to enhance exports, home remittances and FDI besides curtailing the import to improve balance of payment and build the foreign exchange reserves.