Pakistan to raise $500m through ME bonds: Daily Times

KARACHI: Pakistan plans to raise $500 million over the next year through bonds aimed at Middle East investors, State Bank Governor Syed Salim Raza has said.

“The credit-default swap rate for Pakistan is still high so to go to cold-nosed commercial markets wouldn’t suit us,” Raza told Bloomberg.

“The state of global financial markets will decide whether Pakistan can tap them for a bond issue, but currently it looks very difficult,” said Farid Khan, director at Credit Suisse Pakistan in Karachi. “Indonesia [rated four levels above Pakistan] has just raised $3 billion at a prohibitive cost of 840 basis points [dpouble the premium it paid in June] over US Treasuries and Pakistan’s pricing will be worse.”

But, Middle East investors too may be reluctant to buy Pakistan debt as their economies slow amid lower crude oil prices.

The economy of the Gulf Cooperation Council is forecast to contract by 2.4 percent in 2009, after expanding 5.2 percent in 2008, according to a report by the Kuwait-based Global Investment House.

“It would be tough to find buyers given the political crisis there and the credit crisis around the world, including in the Gulf region,” said Krishna Iyer Mohan, head of treasury at Safat-based Kuwait Financial Center, the nation’s second- largest investment bank that manages $5.5 billion of assets. “It’s not just the returns that investors look for, it’s the safety and liquidity of the assets that’s most important in this environment.”

Pakistan’s government debt is the riskiest in the world after Argentina and the Ukraine, according to credit-default swap prices from CMA Datavision. It costs $2.3 million annually to protect $10 million of the country’s debt from default for five years.

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