Karachi: The government issued its very first obligation to coupon at 15 on Wednesday in order to diversify its investor base with innovative financing products and improve debt management.
The government has managed to increase more than 1.2 billion of rupees thanks to a large auction of public bonds, the Ministry of Finance said in a press release. This included the introduction of a new obligation to zero-yearly coupon, the first of its kind in Pakistan. The obligation has received high demand from investors, increasing more than 47 billion rupees, he added.
The obligation issued at 12.7%. “This new obligation does not pay interest each year. Instead, investors receive a lump sum after 15 years. This helps the government to reduce short-term reimbursements and better plan finance.” This decision is part of the wider strategy of the government aimed at reducing the risk of borrowing, to extend the period of debt repayment and to promote Islamic and long-term financial products, “he added.
Yields on other state obligations have also dropped, indicating the optimism of the financial markets as to the drop in inflation and the drop in interest rates in the future. The yield decreased in the Pakistani investment obligations at fixed rate (drop of 44 SBPS of 5 years, down 9 SBPS), signaling the confidence of investors in monetary relaxation.
According to the government, Pakistan debt now becomes more stable. The average reimbursement period of the interior debt increased from 2.7 years last year to 3.75 years, which quickly reduces the pressure to reimburse loans. In addition, more retirement funds and insurance companies – rather than simple banks – are now investing in state bonds. This allows you to distribute financial risks and deepen the local investor base.
The Minister of Finance, Senator Muhammad Aurangzeb, said: “This is a major step in the strengthening of the stronger and more resilient Pakistan financial system. We introduce new smart ways to borrow that reduce risks and give investors more options. Our goal is to manage public debt in a responsibility, to promote Islamic finance, and to attract more long -term investments to support the country’s economic growth. ”
The Ministry of Finance also works on more products to allow ordinary citizens to invest in state bonds, in particular Islamic obligations, to encourage savings and financial inclusion.
