The Asian Development Bank (ADB) has raised Rs 1.83 billion ($11.4 million) in the first issue of local currency Karakoram Bonds.
The Karakoram Bond is an offshore bond denominated in Pakistan rupees and settled in US dollars, listed on a major stock exchange and settled through an international central securities depository. The issuance of this bond was done by the multilateral Asian Development Bank, of which Pakistan is a member.
The bonds were arranged by Citigroup Global Markets and sold to European asset managers. The international bond issue pays a 7.50% semi-annual coupon and matures in August 2023.
The net proceeds from the sale of the bond issue will be included in ADB’s ordinary capital resources, which would allow Pakistan to borrow from the ADB in local currency as opposed to dollar borrowing, an option that was not previously available. It is anticipated that ADB’s local currency loans will be a boost to private sector development in Pakistan and reduce the pressure on the economy as the transaction will be not impacted by the changing rates of the US dollar.
“Engineering local currency solutions is both an art and a science,” said ADB Treasurer Pierre Van Peteghem. “Not only must we marry investor demand 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.”
The Adviser to Prime Minister on Finance and Revenue Abdul Hafeez Shaikh said the ABD local currency bonds will help boost and deepen capital markets in Pakistan. “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.” he said.
State Bank of Pakistan Governor Reza Baqir congratulated the ADB team and affirmed his appreciation of ADB’s support for Pakistan’s financial and economic development terming it a much needed “channelling of funds to vital economic sectors.”
ADB expressed a positive appreciation for the support provided by the State Bank of Pakistan to facilitate coordination with the government to start this program successfully. 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.
ADB has already issued local currency bonds in Indian rupees, Kazakhstan tenge, and Mongolian togrog in 2020.