The government wants to raise a loan from the international capital market through issuance of bonds to support the under pressure foreign exchange reserves due to widening trade deficit and decline in remittances.
This was confirmed by a senior official of the Finance Ministry on condition of anonymity. He added that the government plans to borrow from the international market prior to December, and stated that preparations to this effect are under way. He added that an encouraging response from the market would send a positive message to the multilaterals and bilaterals which would be very helpful for future borrowing from them.
Sources on condition of anonymity said that the amount would be decided after a response from the international market subsequent to road shows. They added the government would have to borrow either from international market through issuance of bonds or from commercial banks to contain the widening financing gap.
Sources further added that Pakistan foreign exchange reserves have declined from $16.1 billion in June 30, 2017 to below $14 billion in the first week of October. This situation, they added, may lead to the market charging a high mark up. Pakistan''s monthly financing gap is expected to increase to $1 billion per month from the existing gap of between $700 to $800 million. The government must take some urgent remedial measures in support of the deteriorating balance of payment position, sources added.
Background discussions with officials revealed that the government may be compelled to go for commercial borrowing as multilateral/bilateral budget support may be contingent on a letter of support from the International Monetary Fund (IMF).
They added that widening trade deficit and a decline in remittances would continue to put pressure on the balance of payment position and incentives announced in the export package by the Economic Coordination Committee (ECC) of the Cabinet on Friday would not lead to positive results in the short run.