The government on Thursday launched five-year dollar-denominated diaspora bonds at an interest rate of 6.75%, which is higher than the price at which Pakistan had issued the last two bonds of same tenor.
Officially called as Pakistan Banao Certificates, the government invited the overseas Pakistanis to invest in three-year paper at 6.25% interest rate and in five-year bonds at 6.75% interest rate.
Prime Minister Imran Khan officially launched the bonds at a ceremony at his office. He said that the balance of payments crisis “was not over” yet — a stance that was different from an earlier statement by the Finance Minister Asad Umar.
Umar also said on Thursday that the balance of payments crisis was not over but there was improvement in it. Umar described the diaspora bonds as his “out-of-the-box solution” to Pakistan’s persistent external sector problems.
The bonds have been launched to raise funds for the current account deficit financing, as the gross official foreign currency reserves remained at $8.2 billion only, despite loans from Saudi Arabia and United Arab Emirates. The $8.2 billion reserves are not enough for even seven weeks of imports.
It was the second appeal that Prime Minister Khan had launched. Earlier, he had appealed to the overseas Pakistanis to give donations for building dams. “I appeal to the overseas Pakistanis to invest in Pakistan Banao Certificates,” Prime Minister Khan said.
Overseas Pakistanis can invest in the bonds by June 30, State Bank of Pakistan Governor (SBP) Tariq Bajwa said. The interest rates were relatively higher because the bonds were meant only for overseas Pakistanis, said Dr Ashfaque Hasan Khan, a member of the Economic Advisory Council.
The offered rates are also higher than the previous two five-year bonds, which were issued in 2016-17 and 2017-18. In 2016-17 Sukuk bond, the PML-N government raised $1 billion at 5.5% interest rate. Last year, the PML-N government issued five-year Eurobond at a rate of 5.625%.
The rates on Sukuk bonds are relatively lower because these are backed by assets. Initially, the PTI government also wanted to float these bonds at an interest rate, ranging from 5 to 5.5%.
“The return on investment is not higher than what Pakistan will have to pay if it issues a new bond but this is higher than what overseas Pakistanis are currently receiving,” Finance Minister Asad Umar told the launching ceremony. He added that he had directed the finance ministry to launch two more financial instruments to raise more funds.
Prime Minister Khan appealed to the Pakistanis to get returns on their investment in rupees, although the government has offered returns in dollar. In case the overseas Pakistanis redeemed the bonds in Pakistani rupee, they would get 1% premium, the SBP governor told the ceremony. This means the rate for three-year bond will be 7.25% and for five-year 7.75%.
The Finance Ministry said that these Certificates will generate foreign exchange for the socioeconomic development of the country.
Tue minimum investment size is $5,000 with no upper limit. The overseas Pakistanis, having a CNIC, Nicop or POC and maintaining their bank accounts abroad, can invest in the Pakistan Banao Certificates digitally through a dedicated secure website [www.pakistanbanaocertificates.gov.pk].
In his speech, Prime Minister Khan also promised his government would make Pakistan prosper and strong and that the diaspora would be proud of the country of their origin. “I have the first-hand experience of how they were treated after the September 11 attacks”, he recalled.
“It is important for overseas Pakistanis to see the country prosper,” Khan said. “Going to the IMF was not difficult but the easier option for us,” he went on to say, adding that the balance of payment crisis had not been resolved yet.
The prime minister said he had directed all the Pakistani embassies to address issues, facing the disapora. “There are ups and downs in life but important thing is how we deal with difficult situations and come out of it stronger than before,” he said. “Pakistan will become an example of transformative change.”
He hoped that Pakistani expatriates would send back remittances through banking channels. The foreign policy, he said, was now solely based on the interests of the public.