KARACHI:
Pakistan regained the confidence of international investors as the country risk premium fell sharply from a peak of more than 14% in June, while its dollar-denominated Eurobond prices rose sharply.
Topline Securities CEO Mohammed Sohail said on social media platform X “Pakistan’s country risk premium has come down significantly from a peak of 14.13% on June 27, 2023 to the current level of 3.35%. This shows the building of investor confidence in Pakistan’s post-IMF standby agreement (SBA).’
The reduction in the risk premium signals a revival of global investor confidence in Pakistan’s equity and debt securities from the previous negative stance.
On the other hand, prices of Pakistan’s $1 billion Eurobond maturing in April 2024 rose to 94.08 cents from nearly 50 cents in June.
Prices of other Eurobonds and Sukuk have also maintained their upward trend since the IMF granted a $3 billion loan facility at the end of June 2023.
Speaking to The Express Tribune, head of research at Pak-Kuwait Investment Company, Samiullah Tariq, said that the fall in risk premium and improvement in Eurobond prices suggest that there is no risk of Pakistan defaulting on its external debt compared with high bankruptcy fears before. the SBA.
The government’s decision to let foreign investors in debt and equity markets move their capital in and out of Pakistan despite default risks has helped revive their confidence.
Reading: Pakistan’s Eurobonds soar to multi-year highs
Pakistan has also recently lifted restrictions on foreign companies operating in the country on full repatriation of profits and dividends to their overseas headquarters after the country’s foreign exchange reserves improved.
Such companies freely repatriated profits in October, which came after an unannounced moratorium for the past 18 months or so.
Although foreign reserves are still low and financing from international creditors and international investors is not materializing, Tariq noted that approval by the IMF’s executive board to release the second loan tranche of $700 million would encourage other global creditors to unlock the promised funding.
He recalled that the UAE had assured the IMF about two weeks ago that it was committed to providing pledged funds to Pakistan. In addition, multilateral and bilateral creditors have pledged approximately $10 billion for flood relief in Geneva in January 2023.
Published in The Express Tribune, November 24u2023.
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