The Pakistan government plans to issue $2 billion worth of bonds in the next four months in a bid to reduce debt due to non-payment of bills to oil and gas companies and also improve liquidity, a petroleum ministry official said this week.
Of this, $500 million worth will be issued overseas and Pakistan Rupees 130 billion, around $1.5 billion, worth of bonds will be issued in the domestic market, he added.
But analysts are not too keen on the idea of floating the bonds in the domestic market, which is planned for July-September.
"The government is making an effort to reduce the issue of debt among the state-run companies," said Farhan Mehmood, head of research at Karachi-based brokerage house Topline Securities. "However, this is not a wise solution ... the government should force companies to pay their gas, oil and electricity bills on time so that it doesn't face the burden of mounting debt," he added
The government is in the process of finalizing the consortium that will advise it on the issue of Oil and Gas Development Co. bonds worth $500 million in foreign stock markets, an Islamabad government official said. The consortium comprising Citibank, JP Morgan, Credit Suisse, and BMA was likely to be chosen, he added.
"We aim to float these bonds by June 25," he said.
According to an earlier plan, the government was aiming to sell $200 million of bonds by June 30, the end of the current fiscal year, while $500 million worth of bonds were to be issued in the next fiscal year in two phases or depending on the interest of foreign investors.
Pakistan's oil and gas sector has been caught in a spiral of circular debt since the middle of 2008, whereby state-owned utilities had defaulted on payments to gas distribution companies. These companies are then unable to pay OGDC for the gas they have purchased from them.
