ISLAMABAD, Jan 25 (Reuters) – Pakistan has raised $1 billion with a 7-year sukuk, offering an interest rate of 7.95%, the highest yield the South Asian nation has ever paid on an Islamic bond, a finance ministry official said on Tuesday. .
The issuance comes at a time when Pakistan’s gross foreign exchange reserves have fallen to nearly $17 billion from $19 billion in the past two weeks due to debt repayments.
Ministry spokesman Muzammil Aslam said international debt markets around the world had suffered shocks since December due to expected increases in interest rates in the United States and Europe.
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“So, given the situation, we made the right deal in these uncertain times,” he told Reuters.
Pakistan sees inflows of foreign funds as essential given that its external account deficit has widened due to soaring global commodity prices – particularly oil, which accounts for around a third of the country’s payments.
Foreign exchange reserves are also an essential buffer to stabilize the rupee. It was only last year that Pakistan adopted a market-based exchange rate, which led to a sharp depreciation of the rupee.
An IMF review committee meets on January 29 to approve a $1 billion tranche of a $6 billion loan signed with Pakistan in 2019.
The last sukuk issued by Pakistan was a five-year sukuk in 2017 at a rate of 5.6%.
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Reporting by Asif Shahzad; Editing by Edwina Gibbs
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