Pakistan clears $517m Eurobond payment

Pakistan has paid back $517 million to investors of Eurobond on its due maturity date of Feb 18, 2009, indicating Islamabad’s ability to meet its external liabilities without fear of default after obtaining $7.6 billion loan package from the International Monetary Fund (IMF), a senior official of government confirmed on Wednesday night.Pakistan had launched Eurobond $500 million in Feb 2004 during the Musharraf regime.After maturity of five years, the Eurobond payment including its principle amount of $500 million was due on Wednesday and Islamabad successfully fulfilled this obligations.“We have paid back Eurobond payments including its principle amount and interest worth $517 million to its subscribers on Wednesday,” State Bank of Pakistan’s spokesman, Syed Wassimussin confirmed while talking to this scribe here on Wednesday. The Detusche Bank out of three Lead Managers appointed by Islamabad for Eurobond deal was the agent for making payments to subscribers of this paper. “Yes we received letter from the Economic Affairs Division (EAD) for making payments to Eurobond subscribers and we transferred the amount of $517 million into the accounts of our Agent bank for this deal,” official sources also confirmed on Wednesday night.Before getting $7.6 billion loan package from the International Monetary Fund (IMF) on November 2008, there was risk of default because of rapidly depleting foreign currency reserves.The foreign currency reserves held by the central had fallen around $3 billion. “Now our foreign currency reserves are over $10.2 billion and there is no problem for making this substantial repayment,” the spokesman of the central bank further said.Pakistani officials and the IMF authorities are currently holding talks in Dubai to qualify for the second tranche worth $775 million of $7.6 billon programme approved in November 2008 to save the country from a default on external payments.Pakistan is also set to seek additional $4.5 billion from the IMF, jacking up the loan amount from $7.6 billion to $12.1 billion in a bid to improve its foreign currency reserves.The government should make efforts to generate more revenues as well as curtail expenditures side rather than seeking more foreign inflows, said an independent economist and added that the debt sustainability would become a major issue if Islamabad continued to get foreign loans without well thought out strategy.The 23-month stand-by loan gave Islamabad $3.1 billion immediately and the rest of the money is to be phased in over the course of the period if Islamabad manages to fulfil IMF’s envisioned targets of reducing the deficit and State Bank of Pakistan’s financing of the government, among other tight fiscal and monetary measures.