State Bank of Pakistan repays $1 bn in Eurobonds ahead of IMF bailout

The State Bank of Pakistan has repaid $1 billion in Eurobonds as the cash-strapped country prepares for a new long-term bailout from the IMF to help manage its external financing needs and economic recovery, a media report said here on Sunday.

Pakistan's central bank announced that it met the dollar bond payment on Friday for the 10-year bond launched in 2014 maturing this month.

Ahead of the April 15-20 meetings of the International Monetary Fund (IMF) and the World Bank in Washington DC, Pakistan government has decided to formally approach the IMF for a medium-term Extended Fund Facility (EFF) with the possibility of augmenting through climate finance.

The Eurobonds repayment comes amid Asian Development Bank's (ADB) apprehension that Pakistan's economic outlook remains uncertain.

The SBP has successfully executed the repayment of $1 billion Pakistan's International Bond on April 12, 2024 (principal plus interest). The payment was made to the agent bank for onward distribution to the bondholders, the Bank said in a statement on Saturday.

This bond has rallied by 84 per cent so far this year, The News International said on Sunday quoting the Bank statement.

In response to growing worries, the country's assets came under pressure last year when its foreign exchange reserves dropped below $3 billion in February 2023 due to the delayed IMF programme. This stoked concerns about a possible bond payment default, it said, adding that the country managed to secure a $3 billion IMF stand-by arrangement last summer.

Now, after the general elections were held in February 2024, Islamabad is reportedly ready to begin talks with the global lender for a new loan programme, the newspaper said.
 

Pakistan's short-term financial prospects are cautiously optimistic. Concerns remain, nevertheless, over its capacity to pay off its long-term debt. The country has to pay back $4.3 billion in external debt in the last quarter of this fiscal year, the report said.

After repayment of 2024 bond, Pakistan's total outstanding international bonds/Sukuks are $6.8 billion (6.8 per cent of public external debt) with the next maturity amounting to $500 million in September 2025, it said quoting Shahid Ali Habib, the CEO at Arif Habib Limited.

The central bank's foreign exchange reserves have fallen following the latest bond repayment. However, it seems likely that with the $1.1 billion final IMF tranche, which is expected to be released after the global lender's board meeting later this month, FX reserves will increase to $8 billion, the newspaper said.

As of March 29, the SBP had $8.04 billion in foreign reserves. The $3 billion IMF stand-by arrangement ended on Thursday, it added.

On April 11, the Asian Development Bank (ADB) said that Pakistan's economic outlook remains uncertain, as political instability would remain a key risk to the sustainability of stabilisation and reform efforts.
 

The Manila-based lending agency in its Asian Development Outlook' said if reforms are implemented, growth is forecast to restart gradually this fiscal year and improve slightly next year.

The ADB predicted 1.9 per cent growth in the fiscal year 2024 (ending on June 30, 2024) and which would then gradually improve to 2.8 per cent in the fiscal year 2025, driven by higher confidence, reduced macroeconomic imbalances, adequate progress on structural reforms, greater political stability, and improved external conditions.