Pakistan revises buyback rules to cut debt servicing cost

The Pakistan government has revised the rules for buyback and exchange programs on securities to cut debt servicing costs by December 2024.

The move has been taken after an unprecedented Rs3.4 trillion profit by the State Bank of Pakistan (SBP) due to a record-high 22pc interest rate, which has now dropped to 16%.

According to a notification issued by the Debt Management Office (DMO) of the Ministry of Finance, Pakistan, the scope of the Government Securities Buyback & Exchange Program has been expanded in line with international best practices.

The revised program now allows for the exchange of securities in addition to the existing buyback option, aimed at easing the Pakistan government’s financing burden.

Sources indicate that several securities are due for maturity in December, and the government intends to buy back or exchange securities valued between Rs300 billion and Rs500 billion. This move is expected to reduce some of the financing pressures.

The amended rules also introduce revised eligibility and auction criteria to provide greater flexibility in line with market practices.

As per the new criteria, any government-issued security that is due for maturity can be considered for buyback or exchange, allowing the DMO to execute either a full or partial buyback and exchange transaction.