The Asian Development Bank (ADB) has raised Rs. 1.83 billion Pakistan ($11.4 million) in the first issue of local currency Karakoram bonds through a multilateral development bank, of which Pakistan is a member.
A Karakoram bond is an offshore bond denominated in Pakistan rupees and settled in US dollars, and listed on a major stock exchange and settled through an international central securities depository.
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The international bond issue pays a 7.50% semi-annual coupon and matures in August 2023. The bonds were arranged by Citigroup Global Markets and sold to European asset managers.
The net proceeds from the sale of the bonds issue will be included in the ADB’s ordinary capital resources.
Previously, the ADB did not have local currency loans in Pakistan but this option will be offered in future projects as an alternative to dollar borrowing. It is anticipated that the ADB’s local currency loans will boost the development of the private sector in Pakistan.
“Engineering local currency solutions is both an art and a science,” said the ADB Treasurer, Pierre Van Peteghem.
“Not only must we marry investors’ demands with market conditions to achieve optimal currency and interest rates, but we must also dedicate time and resources to a close dialogue with the government to achieve the best possible outcome,” he added.
“The Pakistan rupee-linked Karakoram bond floated by ADB is an excellent initiative. I am confident it will have significant mutually beneficial outcomes for Pakistan and ADB,” said Abdul Hafeez Shaikh, the Adviser to Pakistan’s Prime Minister on Finance and Revenue.
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The Governor of the State Bank of Pakistan (SBP), Reza Baqir, congratulated the ADB team and affirmed his appreciation of the ADB’s support for Pakistan’s financial and economic development.
“ADB’s inaugural issue of Pakistan rupee-linked Karakoram bonds will help deepen the capital markets of Pakistan while channeling funding to vital economic sectors,” he said.
The ADB values the SBP’s support to facilitate its coordination with the government to successfully start this program.
The ADB is a regular borrower in the mainstream international bond markets. It has also led issuances in developing Asian countries as part of its efforts to promote local currency bond markets as an alternative to bank lending. The bank has issued local currency bonds in Indian rupees, Kazakhstan tenge, and Mongolian togrog this year.
