Karachi: Investors believe Pakistan’s dollar bonds will rally for second year as government is expected to secure another bailout from International Monetary Fund (IMF), reported Bloomberg. UBS Asset Management and William Blair Investment Management see its bonds remaining attractive after almost doubling in 2023, report said.

Suleman Rafiq Maniya an independent wealth manager in Karachi said gains can be as much as 37 percent in next 18 months, report added. Last year in June, Pakistan managed to clinch last-minute agreement with IMF, as two parties reached an agreement on policies to be supported by $ 3 billion, nine-month Stand-By Arrangement. An index on Pakistan’s dollar bonds gained 93 percent in 2023, best performance in emerging markets after El Salvador.

New IMF arrangement, seen at time as massive positive for government and economy reeling from crisis, not only extended Pakistan’s commitment with lender well into second half of fiscal year 2023-24, but was also an upgrade from earlier expectation that country would receive $ 1.1 billion after ninth review. Programme allowed South Asian country avert sovereign default and catapulted nation’s bonds to rank among top performers in world last year, said report. While gains are expected to moderate, reforms such as raising fuel and electricity prices may open door for another round of funding, it said.

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“They seem committed to this IMF programme and that is significant point because it suggests there is big likelihood for them to get another bailout,” said Johnny Chen, fund manager at William Blair in Singapore. “There is also strong potential for reforms to pick up momentum after elections.”

Bloomberg shared that an index on Pakistan’s dollar bonds gained 93 percent in 2023, best performance in emerging markets after El Salvador. Report said that investors are trying to gauge risks as Pakistan goes for elections month before current IMF programme ends in March.

Fulfilling IMF demands helped Pakistan secure financing from friendly countries as well as other multilateral lenders, because of which “Risk of default in 2024 has gone down significantly,” said Shamaila Khan, head of emerging markets and Asia Pacific at UBS Asset Management in New York.

“Everything is predicated on country sticking to IMF programme, which is our base case.” Market has now set its eyes on IMF’s Executive Board, which is expected to meet on January 11.

Published in The Daily National Courier, January, 04 2024

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