'Attractive time' for Pakistan to tap international bond market

It is an attractive time for Pakistan to tap the international bond market by selling Eurobonds and Sukuk. It has received the second tranche of $1 billion from the International Monetary Fund, its credit rating may be upgraded by international agencies, and interest rates are declining globally.

There is a great chance that Pakistan may float Eurobonds in the next fiscal year after the turnaround in the country's economy with reforms introduced to strengthen key indicators.

Syed Mohammed Shariq Abidi, director treasury at BMA Capital Management, said that the current low-yield environment and favorable international economic conditions make it an attractive time for Pakistan to tap into global markets.

"We expect Pakistan to explore new avenues, including listings on major stock exchanges or bond market," he said.

Pakistan's economy is recovering, driven by recent reforms, a sharp drop in interest rates, and stable inflation. Investor confidence is rising as economic indicators improve, including a stronger currency outlook and lower debt risk.

Under these favorable conditions, Pakistan is well-positioned to attract foreign investment and may soon issue new bonds or pursue listings in international markets.

Abidi said that after the recent ceasefire and Pakistan's economic reforms, global investors are taking notice of the country's improving economy.

The Ministry of Finance's pro-growth approach has led to a significant decline in yields, with interest rates dropping from 22% to 11%.

The State Bank of Pakistan's monetary policy is expected to continue easing, with a potential 1% interest rate cut on June 16.

In an auction held on Wednesday, cut-off yields on short term government securities decreased by 66-90 basis points (bps).
The cut-off yield for the three-months paper was at 11.24%, dropping by 77bps, and six-months paper at 11.28%, dropping by 72bps.

For the one-year the cut-off yield stood at 11.35%, dropping by 62bps.

Inflation is also under control, with average CPI at 4.5% and core inflation at 7.5%. Projections indicate that inflation will remain below 7% for the next fiscal year.

The Ministry of Finance's clear stance on currency parity, targeting a rate of 290 PKR per dollar, will support exporters.

Pakistan's economic fundamentals are improving, reflected in the decline of Eurobond yields and Credit Default Swaps (CDS). This positive outlook may lead to new investment opportunities, including potential Eurobond or Sukuk bond launches in international markets.