The audit department has declared the 2014 Euro Bonds as irregular and unauthorized in its recent audit report 2018-2019.
The audit report notes that the bonds were issued without taking the cabinet’s approval, which is a violation of Rule 16 (d) of Rules of Business. The said rule mandates certain proposals like that for abolition, levy, remission, alteration, or regulation of any tax and floatation of loans to be brought before the cabinet.
Moreover, the audit department found that the bonds were issued at the highest interest rate when compared to those offered in other similar economies. In Pakistan, 8.25 percent interest rate was offered against the $1 billion, 10-year bond while 7.25 percent was offered against $1 billion Euro Bond. The government raised Rs. 280 billion through these bonds.
Whereas, Sri Lanka raised $1 billion on 5.875 percent, Mongolia $750 million on 5.125 percent, Nigeria $500 million on 6.375 percent, Vietnam $ 1 billion on 6.750 percent, Zambia $750 million on 5.125 percent while Mozambique floated $500 million against 6.305 percent interest rate.
The audit report states that the issuance of bonds without the cabinet’s approval and at a higher rate was irregular and unauthorized, resulting in extra financial burden on the national exchequer.
The report also states that the issuing authority and the management of the finance division did not reply until the report’s finalization. The audit department is still waiting for a reply on the matter.
The report has also recommended to adjust the loss incurred by the bonds and identify people responsible for that. The Euro Bonds were issued in April 2014 by the then finance minister Ishaq Dar. However, it caught the attention of the audit department only recently.