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Pakistan’s bond yield jumped to record 106%.


KARACHI: On Wednesday, the price of Pakistan’s US dollar-denominated international bond fell for the sixth consecutive working day, while its yield jumped 16% to a record high of over 106% on the global market.

Bond yields and prices move in opposite directions. The recent price drop and yield increase suggest that Pakistan’s danger of default on foreign debt repayment, particularly payments for maturing global bonds, has increased amid a worsening balance of payments problem.

Pakistan’s political temperature has risen, causing the economy to suffer. In Lahore, a conflict between law enforcement officials and supporters of former Prime Minister Imran Khan entered its second day.

Pakistan Government International Bond, a ten-year sovereign bond, is valued $1 billion. According to statistics provided by local research firms, it will mature on April 15, 2024, implying that the government would repay the borrowed funds to investors.

According to Bloomberg, “Pakistan’s 2024 bonds fell for the sixth day in a row, leading losses among developing-country peers…, as investors evaluated skirmishes between supporters of former Prime Minister Imran Khan and police.”

It claimed the debt due in 2024 was shown at 46 cents on the dollar, a 5 cent decrease.

According to Arif Habib Ltd, the yield increased by 16.1% in a single day to 105.8% on Wednesday. Other Pakistani international bonds’ yields have risen as their values have fallen in recent days.

Pak-Kuwait Investment Company Head of Research Samiullah Tariq told The Express Tribune that “bond price and yield will remain erratic till the International Monetary Fund (IMF) resumes its $6.5 billion loan programme.”

Shehbaz Sharif, Prime Minister of Pakistan, has stated that his government will reach a staff-level deal with the IMF on March 16.

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After the programme is revived, Pakistan will get the next loan tranche of $1.1 billion. A couple of billion dollars in financing will also be made available by other international and bilateral creditors.

“The release of financing will signal bond investors that Pakistan’s balance of payments position has improved and it will be able to pay the maturing debt on time,” he said.

Early in November-December 2022, the yield on the $1 billion five-year bond soared to over 145% when it was successfully redeemed ahead of its expiry date on December 5, 2022.

Finance Minister Ishaq Dar and SBP Governor Jameel Ahmad have both stated that Pakistan will not default. It will continue to make on-time payments on all maturing debts because the necessary financing has been secured for the current fiscal year.

Tariq stated that increased political uncertainty had greatly led to the bond price decline. “Political conflict mostly impedes governments from developing economic strategies and weakens economic indicators.”

Earlier this week, Bank of America warned of the danger of Pakistan defaulting on international debt repayment if the IMF program’s commencement was delayed.

Major credit rating agencies such as Moody’s Investors Service and Fitch Ratings have recently lowered Pakistan’s foreign and domestic credit ratings, indicating that the probability of default has peaked with little likelihood of recovery.

The governor of the SBP recently stated that Pakistan would repay only $3 billion in foreign debt in the current fiscal year, out of a total owing of $7 billion. He expected the remaining $4 billion to be carried over by bilateral creditors.

Pakistan’s other international US dollar-denominated bonds will maturity between September 2025 and April 2051. Pakistan’s total worldwide bond market value is $7.8 billion.