Pakistan Government considering dollar-denominated bond

“The News” report by Mehtab Haider

The government is considering launching dollar-denominated Pakistan Infrastructure Development Bond in the next financial year to arrange financing for mega projects such as construction of Bhasha dam, metro bus service and other new initiatives, official sources said.

To meet the infrastructure requirements, Pakistan requires multibillion dollars investment to fill this gap and there is a concept to involve overseas Pakistanis in the development projects where return on savings will be guaranteed by the government of Pakistan.

When contacted, Finance Minister Ishaq Dar said that first the government will take measures to stabilise the economy and then the bond will be launched.

“In order to make Non-Resident Pakistanis (NRPs) living abroad as part of the developmental projects, an online web-based application is under consideration, which will enable them to invest through one-window operation,” official sources told The News.

Pakistan has been lagging behind in developing infrastructure because of several reasons but the lack of investment is the major cause in achieving the desired results.

With the total portfolio touching Rs2.428 trillion in different schemes of the Central Directorate of National Savings (CDNS), the officials said that in the wake of budget speech of Finance Minister Ishaq Dar, four new products were under consideration, including Pakistan Savings Prize Bonds, Children Protection Scheme, Shariah-compliant paper and dollar denominated Pakistan Infrastructure Development Bond.

Besides, it is an endeavour of the National Savings to become major source of funding for the government, besides financing the development projects, ie, Bhasha dam, highways just like in several other developed countries, the officials said.

Total investment in various instruments of the National Savings Schemes (NSS) touched Rs2,428 billion mark till June 13. Against the envisaged target of Rs223.789 billion to attract investment during the outgoing financial year, the CDNS has so far crossed its desired target with massive margin and it lured investment of Rs350 billion.

Basically, the CDNS arranges financing for yawning budget deficit as the overall gap between revenues and expenditures will cross Rs2 trillion mark, or 8.8 percent, of GDP in the outgoing financial year. In such a huge financing requirement to fill the budget deficit, the role of NSS becomes important because otherwise the government is left with no other option but to print money from the State Bank of Pakistan (SBP) or accept dictation of bankers on crucial financial issues, the officials said.

The CDNS was among the few institutions during the last five years where all envisaged targets were met successfully as in the financial year 2007-08, the NSS had achieved 99 percent of its envisaged target as it lured investment of Rs89 billion against the assigned target of Rs90 billion.

The CDNS crossed its assigned targets in all the years, ie, 2008-09, 2009-10, 2010-11 and 2011-12 and in 2012-13 it has surpassed the target by 157 percent.

The NSS product basket also witnessed five new schemes in the last five years, as it launched first-ever listed tradable bond called National Savings Bond (NSB) of three, five and 10 years maturity with the idea to strengthen the secondary market of debt securities and establishment of “Bond management unit” for management and launching of the market-based securities.

The government launched prize bond of Rs25,000, which attracted investment of Rs20 billion against the assigned target of Rs5 billion.

They also launched short term certificates from July 1, 2012 of three, six and 12 months maturities and to promote the habit of savings among youth, the government launched Rs100 Student Welfare Prize Bond.


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