Diaspora Bonds falls flat, even after PM Appeal’s For Investment

ISLAMABAD 24th July: Prime Minister Imran Khan’s second major appeal to overseas Pakistanis has also failed to yield desired results as less than 600 expatriates invested a mere $26 million in Diaspora bonds.

Raising funds from non-resident Pakistanis for current account deficit financing was Pakistan Tehreek-e-Insaf (PTI) government’s out-of-the-box solution to a mammoth problem. PM Imran had hoped for getting a huge response from the Pakistanis living in the United States, Canada and the United Kingdom.

As of the end of June, less than 600 non-resident and resident Pakistanis invested roughly $26 million in Pakistan Banao Certificates, according to sources in the Ministry of Finance and the State Bank of Pakistan (SBP).
The number of participants fell even below 500 after excluding multiple transactions by one person, they added.

The central bank, which administered the prime minister’s flagship scheme, declined to officially disclose the amount invested in the Diaspora bonds. SBP’s chief spokesman Abid Qamar said the Ministry of Finance should answer queries about the Diaspora bonds.

It was the second major appeal that PM Imran made to expatriate Pakistanis, which also met the same fate as the first appeal that the premier had made in September last year for raising funds for Diamer-Bhasha and Mohmand dam projects.

In January this year, the prime minister himself launched the Pakistan Banao Certificates in a bid to get money from overseas Pakistanis for current account deficit financing. But the result of the appeal, which lapsed on June 30, showed that the expatriates did not trust the government.

The government had hoped that overseas Pakistanis would help in a big way to overcome external-sector problems.

Earlier, he had appealed to the overseas Pakistanis to give donations for building mega dams. Of the total Rs10.8 billion in donations for the dams, the overseas Pakistanis donated Rs1.65 billion or $10 million at the current exchange rate, showed the central bank data.

The maximum donations for the dams were given by Pakistanis living in the United States, who donated Rs585.4 million, followed by Rs438.7 million in donations by people living in the United Kingdom and Rs201 million by non-resident Pakistanis living in Canada.

Overseas Pakistanis and resident Pakistanis having offshore bank accounts had an option to invest in the bonds by June 30. PM Imran had offered that non-resident Pakistanis could invest in the three-year paper at 6.25% interest rate and in five-year bonds at 6.75% return. The minimum investment size was $5,000 with no upper limit.

The federal cabinet had approved Rs180 million for the marketing of the bonds and nearly half of the amount has already been disbursed to banks, according to the sources. The sources said due to the faulty marketing strategy, the bonds could not be marketed in Europe and the US.

The federal government has not yet taken a decision on extension of the scheme beyond June 30. In the last fiscal year, the government had to borrow $16 billion – the highest borrowing in the past 72 years – to repay old debt and finance imports. Federal Minister for Economic Affairs Hammad Azhar tweeted on Tuesday that the net increase in external debt and liabilities in fiscal year 2018-19 was $10 billion.

He stated that external debt repayment and servicing consumed $9.1 billion in fiscal year 2018-19.
In December last year, the federal cabinet had approved the issuance of Pakistan’s first renminbi-denominated bonds, known as Panda Bond, to raise loans from Chinese capital markets.

The finance ministry had targeted to conduct the first Panda Bond transaction in the last fiscal year but it could not materialise.

The decision to launch the Panda Bond had been taken to gradually move towards giving the Chinese currency status on a par with that enjoyed by the US dollar.

In the Long-Term Plan of the China-Pakistan Economic Corridor (CPEC) (2017-30), both countries had decided to use renminbi as the second international currency to lessen Pakistan’s reliance on the dollar.

But the finance ministry has delayed the Panda Bond launch for at least one year.

“The launch of Panda Bond is on track and discussions are ongoing with the financial advisers’ consortium engaged following public procurement rules,” said Dr Khaqan Najeeb, Adviser to the Ministry of Finance. He said the consortium comprised China Development Bank, Citibank, CICC and HBL.