LAHORE (July 29 2008): The Punjab government is planning to float bonds worth Rs 10 to Rs 15 billion in the domestic market for funding of provincial projects. Punjab Finance Department sources told Business Recorder on Monday that the government had decided to raise money through bonds after it lost the World Bank Budgetary Support Loan of US $300 million (around Rs 22 billion) for the current fiscal year.
“Before the bond are floated, approval of both Punjab Chief Minister Shahbaz Sharif and the Federal government [in that order] are needed. Hence, the Punjab Finance Department is preparing a presentation in this connection for the Punjab chief minister and trying to get the approval from the Punjab chief executive. The Punjab government is also optimist that the federal government would give the green signal,” they added.
The sources said the government would hire a financial consultancy firm to float bonds and it is targeting local financial institutions. Since the Federal government has banned local borrowing, for this reason the provincial government has decided to float bonds, and an approval from the Federal government in must in this connection. Any financial firm showing interests in buying the bonds and submits Expression of Interest (EoI), the Punjab government would give access to its accounts for financial evaluation.
The sources disclosed that initially the Chaudhry Pervaiz Elahi government showed the intention of floating bonds in the domestic market. “In this regard, eight months ago the last government approached Japan Credit Rating Agency Limited (JCR) for credit rating, which gave AA after evaluating its financial health. However, the plan was deferred due to general elections in February and hence it was decided that the next government would take up the matter,” they added.
They said the present government has taken the idea of the last government to raise finances. However, the present government might not go for fresh credit rating and would try to avoid it, since chances are there that JCR might downgrade the ratings. “Macro economic stability and financial discipline determines the ratings, which at present are not favourable,” they added.
This is not for the first time that bonds are used as way for raising cash, in the past WAPDA had issued Sukuk Bonds, Islamic mode of raising finance, to meet its financial needs for the construction of power generation infrastructure. Also, the Shaukat Aziz government had floated Euro Bonds to raise funds from the international market.
Courtesy: Business Recorder, 29/7/2008