ADB raises $11.4m through issue of first-ever rupee-linked 'Karakoram' bonds

MANILA/KARACHI: The Asian Development Bank (ADB) on Wednesday announced that it had successfully raised Rs1.83 billion ($11.4 million) through the issue of its first-ever Pakistani rupee-linked 'Karakoram' bonds — at 7.5% semi-annual coupon, maturing in August 2023.

In a news release, the ADB defined the 'Karakoram' bond as "an offshore bond denominated in Pakistan rupees and settled in US dollars, listed on a major stock exchange, and settled through an international central securities depository".

"The bonds were arranged by Citigroup Global Markets and sold to European asset managers," it added.

The Mandaluyong-based regional development bank noted that through adding the net proceeds from the bonds' sale to its ordinary capital, it will offer the new option in future projects as an alternative to dollar borrowing as it previously had no local currency loans in Pakistan.

'Excellent initiative'

In this regard, ADB Treasurer Pierre Van Peteghem termed the financial engineering of local currency solutions "both an art and a science".

"Not only must we marry investor demand with market conditions to achieve optimal currency and interest rates, but we must also dedicate time and resources to a close dialogue with the government to achieve the best possible outcome," Van Peteghem said.

Prime Minister Imran Khan's aide on finance and revenue, Dr Abdul Hafeez Shaikh, noted that the ADB's first-ever Pakistani rupee-linked 'Karakoram' bonds were "an excellent initiative".

"I am confident it will have significant mutually beneficial outcomes for Pakistan and ADB,” he added.

'Karakoram' bonds to bolster private sector development 

Similarly, State Bank of Pakistan (SBP) Governor Dr Reza Baqir lauded the ADB's team for the effort, affirming his appreciation of the regional bank's support for financial and economic development in Pakistan.

"ADB’s inaugural issue of Pakistan rupee-linked karakoram bonds will help deepen the capital markets of Pakistan while channeling funding to vital economic sectors," Dr Baqir mentioned.

The bank praised the SBP's support in facilitating coordination with the Pakistani government to successfully start this programme. In addition, it was expected that the ADB’s local currency loans would bolster private sector development in the country.