‘Pakistan Banao’ Bond Yield Double Than Pakistani Expats May Find in US, UK, KSA

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The idea of the bond for overseas Pakistanis was first introduced by a Pakistani professional in December 2013 at a ceremony held in Riyadh to mark Quaid’s birthday.

PKONWEB Report (New York/Islamabad) — Last week Pakistan government launched five-year dollar-denominated diaspora bonds at an interest rate of 6.75%, which is double than most banks in the USA are offering on cash deposits, and higher than the price at which Pakistan had issued the last two bonds of same tenor.

The offered rates compare with coupons of 2.49pc and 2.88pc on US bonds, and 3.5pc and 4pc on Saudi papers of the same maturities, according to local daily Dawn.

For the 9 million plus overseas Pakistanis, the bond offer also beats local Pakistani bank deposit schemes, if dollar to Pak Rupee fluctuations going forward are considered in the yield calculations.

In many western countries such as USA and UK, the gains made on such deposits by expats may not be taxable as they could be considered as income earned abroad.

In the Middle East, overseas Pakistanis would continue to enjoy the gains as non-taxable both in home country and at place of work.

Officially called as Pakistan Banao Certificates, the government invited the overseas Pakistanis to invest in three-year paper at 6.25% interest rate and in five-year bonds at 6.75% interest rate.

The rate offer is substantially attractive and has the potential to raise huge funds to meet fiscal crisis, many expert say.

Experts expect most bond purchase to take place among Pakistani Diaspora in USA, UK and Europe where interest rates on cash deposits (CDs) are comparatively lower on 3-year and 5-year periods.

With attractive features such as minimum $500 each deposit, every three month yield on deposit, no fine on early withdrawals of the deposit and ability to cash out in Pak Rupee or in Foreign Exchange, the bond could be a winner on long-term sustainability standpoint.

The bonds have been launched to raise funds for the current account deficit financing, as the gross official foreign currency reserves remained at $8.2 billion only.

Prime Minister Imran Khan officially launched the bonds at a ceremony at his office on Thursday.

The idea of the bond for overseas Pakistanis was first introduced by a Pakistani professional in December 2013 at a ceremony held in Riyadh to mark Quaid’s birthday. A year later then PM Nawaz Sharif announced his government would launch the bond for expats. The announcement was followed up by another announcement by PM Khakan Abbasi in April 2018, however, it could not be launched due to elections months later in July 2018.

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