Political uncertainty triggers a significant drop in Pakistan’s dollar bonds

WEB DESK: In a recent development, Pakistan’s dollar bonds due in 2051 experienced a significant decline, marking the most substantial decrease since July 2023.

The bonds were indicated to be more than 3 cents lower, trading at 61.2 cents on the dollar. Additionally, the 2029 and 2031 notes also witnessed a dip, as reported by Bloomberg.

The cause behind this downturn is attributed to the prevailing uncertainty, not only regarding the election results but also concerning the legitimacy of those results. Analysts suggest that this uncertainty is directly impacting the weakness in bond prices.

Experts highlight the pivotal role of a stable political setup in negotiating and implementing the International Monetary Fund (IMF) programme.

They emphasised that without a stable political environment, doubts arise about the sustainability of the country’s debt. Unfortunately, early indications suggest that the political setup may be far from stable.

In the face of these developments, the country’s stocks also bore the brunt of the situation. The KSE-100 Index, a benchmark for the Pakistani stock market, traded 1.5 per cent lower by 3:21 pm.

Although there was a partial recovery from a nearly 4 per cent retreat, the overall sentiment remained subdued.

The interplay between political uncertainties, bond values, and stock market movements underscores the challenges facing Pakistan’s economic landscape.