Pakistan has paid back around $1 billion on maturity of five-year international Sukuk, reported a local english newspaper.
This update comes around the same time as Moody’s, a credit rating agency, upgraded Pakistan’s credit rating outlook from ‘negative’ to ‘stable’.
The country had launched $-denominated Islamic bond worth $1 billion with a five-year tenor in the international bond market in November 2014, during the PML-N government’s tenure. The sovereign bonds were issued at a rate of 6.75%.
It got matured in November 2019 and accordingly, the State Bank of Pakistan (SBP) has repaid $1 billion, borrowed to build the foreign exchange reserves. The report quoted an SBP official as he confirmed that a payment of $1 billion was made on Monday against the Islamic bond.
The said payment from the SBP’s foreign exchange reserves will be reflected in the next weekly forex report. However, as per estimates, with this repayment, the SBP’s reserves will most likely slip below $7 billion, quoted a source in the report.
Moody’s highlighted in its report that Pakistan’s foreign exchange reserve adequacy remains low. It further said that foreign exchange reserve adequacy will take time to rebuild.
Sukuk is a very attractive instrument to attract foreign investment. 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.