Govt eliminates taxes on Panda bonds, Sukuk and Eurobonds

Sukuk Eurobonds Panda bonds

Different types of income taxes to raise around $2 billion in debt through Pakistan’s first Chinese currency-denominated Panda bonds, Eurobonds and International Sukuk have been waived by the Federal cabinet.

In a bid to make borrowing relatively less expensive, the federal cabinet has waived one-dozen types of income taxes to raise around $2 billion in debt.

According to a report revealed by a local media outlet, interested investors will not be required to pay up to 30 percent income tax along with other taxes from now on.

The development is followed by the Ministry of Finance’s suggestion that sovereign bonds would be “less appealing to international investors” without exemptions.

The Federal Board of Revenue (FBR) has endorsed the tax exemptions.

Read more: $8 billion increase in Pakistan net foreign exchange reserves since June 2019

It highlighted that with such exemption, the transaction cost made the government of Pakistan’s paper much less appealing to international investors, resulting in higher pricing for the offering.

It added that “All past Eurobonds and international Sukuk were granted similar exemptions.”

The Finance Ministry then informed the Cabinet that it was in the process of floating three types of sovereign instruments – Eurobonds, Sukuk (Islamic bonds) and Panda bonds – to acquire debt.

It would not be out of place to mention here that the major aim of the Ministry is to raise $2 billion from global markets, including around $250 to $300 million from Chinese capital markets through Panda bonds, the first-ever capital market transaction in China.

The sources further said that the exact pricing of debt will depend on the appetite of investors but according to authorities, the cost may be around 5.5 percent to 6.5 percent, depending on the instrument and maturity.

Moreover, the federal government has recently offered a very high interest rate to overseas Pakistanis on investments in digital accounts.

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