Pakistan has successfully reapaid a foreign debt of over $1 billion, shaking up the country’s foreign currency reserves on the day Moody’s rating agency upgraded Islamabad’s credit rating outlook to from ‘negative’ to ‘stable’, Express Tribune reported.
According to the details, Pakistan on Monday has paid back around $1 billion on maturity of five-year international Sukuk.
“We paid over $1 billion including interest payment at the maturity of a Sukuk today (Monday),” reports quoted SBP’s official as saying.
Pakistan had earlier launched a $-denominated Islamic bond worth $1 billion with a five-year tenure in the international bond market in November 2014, during the Pakistan Muslim League-Nawaz (PML-N) government’s tenure. The sovereign bonds were issued at a rate of 6.75%.
The bond got matured in November 2019 and accordingly, the State Bank of Pakistan (SBP) has repaid $1 billion, borrowed to build the foreign exchange reserves.
A sukuk is an Islamic financial certificate, similar to a bond in Western finance, also commonly referred to as “sharia compliant” bonds. Since the traditional Western interest-paying bond structure is not permissible, the issuer of a sukuk sells an investor group a certificate, and then uses the proceeds to purchase an asset, of which the investor group has partial ownership. The issuer of the sukuk bond must also make a contractual promise to buy back the bond at a future date at par value.
The said payment from the SBP’s foreign exchange reserves will be reflected in the next weekly forex report. However, the reports reveal that with this repayment, the SBP’s reserves will most likely slip below $7 billion.
Moody’s in its report has highlighted that Pakistan’s foreign exchange reserve adequacy remains low, adding that that foreign exchange reserve adequacy will take time to rebuild.
At the time of launching the Sukuk, the bond fetched bids amounting to $2.3 billion, five times higher than the actual target set by the government.
The government had planned to raise $1-2 billion in fresh foreign debt before the Sukuk payment was made. The floating of new Sukuk and Eurobond has remained pending for long.
At the time of launching the Sukuk bond, it fetched bids amounting to $2.3 billion which is five times higher than the actual target set by the government.
The government had planned to raise $1-2 billion in fresh foreign debt before the Sukuk payment was made. The floating of new Sukuk and Eurobond has remained pending for long.
