Pakistan, which recently ended its IMF loan programme, plans to tap the international debt markets twice in 2005, hoping it will get cheap borrowing on the back of the country's strong economic fundamentals. "We will be floating another global bond in 2005 besides the planned Islamic bond," Ashfaque Hassan Khan, director general of the country's debt management programme and a finance ministry adviser told Reuters.
"But we have not yet decided its size and tenure," he said.
Pakistan has already selected Citibank and HSBC to jointly lead manage its Islamic bond.
Khan said roadshows for the Islamic bond, also called Sukuks, are planned sometime in January, targeting the Middle East, some Asian countries and Europe.
Islamic bonds comply with Sharia law which forbids interest payments, considered usury by Muslims. Instead investors receive payments based on profits from approved investments.
Khan said the exact date and size of the Islamic bond will be announced later. But a market source in Hong Kong had earlier told Reuters that its size would be around $500 million.
Khan said for the last three years, Pakistan had been receiving around $440 million annually from the IMF under its poverty reduction programme.
"Now Pakistan will look to increase borrowing from the international capital market, but it is not necessary that we lift the same amount which IMF had been providing to us," he said.
CHEAPER BORROWING: Khan said Pakistan hopes that the cost of fund raising from the international capital market will be lower due to its strong macro-economic fundamentals and improved credit standing.
Pakistan returned to the international debt market in February with a $500 million, five-year bond issue - the first since mid-1998, when the United States imposed economic sanctions after Islamabad's nuclear tests.
But since then Pakistan's relations with the United States have improved dramatically because of the country's support in the Washington-led war on terrorism.
And the United States didn't just lift economic sanctions. Washington and its allies gave billions of dollars in grants and aid to Pakistan, helping a rapid turn-around of the country's economy.
Khan said the bond issued in February was priced at a spread of 370 basis points over the February 2009 US Treasury bond.
"But today it is trading at below 250 basis points in the secondary market," he said.
"It means that the spread has become tighter following a turnaround in the country's economy."
"Now the pressure will be on us to keep improving Pakistan's macro-economic story," he said.
Pakistan, which was near bankruptcy in 1999, hopes to meet or even exceed its economic growth target of 6.6 percent in the fiscal year ending June 2005.
In 2004/04 (July-June), Pakistan's economy grew by 6.4 percent. Khan said the main challenge for Pakistan was to stick to its economic reform programme.
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