August 4, 2021

Government Plans To Initiate Medium Term Notes Program

Pakistan is looking to launch short term Sukuk and Eurobonds in the international market to tap the potential investors, internationally. For this purpose, the Finance Division has planned to initiate the Midterm Notes Program (MTN), for one year that covers both Eurobonds and Sukuk.

According to sources, the Finance Division has sought the go-ahead from the Federal Cabinet for launching the MTN program for one year only.

Pakistan’s government is looking for every method in the book to feed it’s the cash-starved economy. Because, as the cash inflows in the economy increase, so does the investor’s interest. Analysts predict that the $6 billion bailout package from IMF has sparked an interest in the foreign investors in the economy of Pakistan. Experts project that Pakistan can raise up to $3 billion from this program. Furthermore, the $1 billion Sukuk, with a maturity of 5 years that were issued in 2014 will mature in the fiscal year 2019-2020 and another $1 billion Sukuk have already matured in the previous fiscal year, so according to experts, it is high time for Pakistan to start working on this program.

However, analysts said that hiring of advertisers and launching of bonds in the international market is a long process and Pakistan might miss-out on a potential opportunity in the market during the launching phase. The solution to this was to set up a capital market program. Therefore, the finance division proposed the MTN program.

The benefits of the MTN program include the reduction in the time to launch the offerings (lead time). Among the requirements for the MTN program are a base prospectus and the listing of the program in a stock exchange. Experts say that it is preferable to list the program in a stock exchange that is in the EU jurisdiction, subject to EU laws.

However, the rating agency Moody’s said that Pakistan’s bonds are junk bonds since they are high-risk bonds and the interest of the investors would be shown at the time of launching of the bonds in the market.

Nevertheless, the IMF and other analysts say that after the bailout package from the IMF the current direction of the economy seems positive and Pakistan can expect to get a good response for the MTN program.

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