Iraq has halted its plan to issue international bonds because the yield it would have to pay on the debt was too high, Deputy Finance Minister Fathil Nabi said on Sunday in a fresh blow to the country's efforts to finance itself. Finance minister Hoshiyar Zebari "ordered that the bond be halted because the interest rate is high", Nabi told Reuters. He did not comment further and it was unclear when, if ever, the plan might be revived.
Iraq, which is battling an Islamist insurgency as well as shrinking oil revenues due to low crude prices, held a week of meetings with investors in Europe and the United States last month in an effort to attract interest in the planned issue.
It aimed to raise about $2 billion in an initial US dollar-denominated issue, its first international bond sale in nine years. The bond, with a tenor expected to be five or seven years, would have been part of a series eventually totalling up to $6 billion.
The government, which has projected a fiscal deficit of about $25 billion this year in a budget of roughly $100 billion, said it needed the proceeds of the bond to pay salaries and fund infrastructure projects in the oil and gas, electricity and transportation sectors.
But investors demanded extremely high yields, which would have been financially burdensome for Iraq if it had agreed to pay them, sources familiar with the matter said.
Zebari told members of parliament's financial committee last week that "it was too difficult to accept paying an 11.5 percent yield in return for an $2 billion bond", the committee's secretary Ahmed Haji Rashid told Reuters.
Iraq hired three top global banks to arrange the sale, Citigroup, Deutsche Bank and JP Morgan Chase, but many institutional investors baulked at the risks.