Given the many internal and external causes contributing to the rise in interest rates, the Water and Power Development Authority (Wapda) has postponed its plan to issue another green Eurobond to raise $500 million by March of next year in order to generate more funds.
The authority currently intends to issue the bond in the upcoming fiscal year (2022-23), pending the viability of the current scenario.
It has become impossible to raise funds by issuing bonds in the international market as a result of the current local and international situation, particularly in light of the current situation in Afghanistan, according to Naveed Asghar, Wapda’s Member Finance. This has resulted in the over-pricing or increasing interest rates on Eurobonds intended for raising funds for the projects.
Following its successful listing on the London Stock Exchange on May 24, the authority issued its first Eurobond, the Indus bond, with a maturity of 10 years and a competitive interest rate of approximately 7.5 percent, in order to raise $500 million. As a result of this announcement, overseas investors offered Wapda investments totaling $3 billion, six times the amount of money it required. The Indus bond was later introduced on May 31 in Islamabad by Prime Minister Imran Khan in a ceremony that was broadcast live around the world. As part of its plan to raise additional funds through bonds in the future based on its financial requirements, the authority successfully raised $500 million through an Indus bond, which is part of a larger effort to raise $2.2 billion over the next five years (with $1.1 billion raised in just two years) to fund the construction of the mega Diamer Basha and Mohmand dams.
According to the official, the country’s political situation, IMF program, widening current account deficit, rising inflation, and falling rupee, as well as other issues, such as the situation in Afghanistan, have all contributed to an increase in interest rates on Eurobonds, which are specifically related to Pakistan, in recent years.
“At the moment, the interest rate has crossed the 8 percent threshold and is rapidly increasing. As a result, it is preferable for us not to issue another bond to generate $500 million this fiscal year under a medium- or long-term note program. Furthermore, the monies we presently have are sufficient to cover our project-related expenses for the remainder of the fiscal year,” the Wapda member stated.
Pakistan’s first 10-year dollar-denominated green bond, offered at a competitive price of 7.5 percent, was said to be unique considering the country’s sovereign bond, which matures in 2031 and has a coupon rate of 7.375 percent. In order to meet our capital expenditure requirements, we expect to return to the market next year for another green Eurobond offering. “Wapda has a diversified financing strategy that has been approved by the government, and it intends to use a variety of financial instruments, including Eurobonds, export credit agencies, and Sukuks,” Mr. Asghar stated.