Islamabad, Sep 27: Govt Updates Debt Management Strategy Amid Buyback Program Changes
The government has officially expanded the scope of its Buyback Program to include a Buyback & Exchange Program, following international best practices.
Govt Debt Management Strategy communicated via a Finance Division notification, aims to enhance the country’s debt management strategy, especially in the current challenging economic environment.
The Buyback & Exchange Program is designed to facilitate proactive debt management by utilizing surplus cash and replacing illiquid or expensive debt securities. This strategy aims to improve market liquidity by directing funds into newer issuances and managing fiscal accounts effectively through the reprofiling of debt maturities.
By repurchasing its outstanding securities before they mature, the government intends to lower its liabilities and strengthen its fiscal position. The program allows for two strategies: a simple buyback, where the government uses its funds to retire bonds, and a buyback & exchange, which enables the government to swap securities of one maturity for another to better manage cash positions and mitigate refinancing risks.
The notification outlines new eligibility and auction criteria:
- Eligibility Criteria: Any maturity of government securities can be eligible for buyback, with the Debt Management Office (DMO) allowed to execute buyback or exchange transactions either partially or fully. Transactions must occur near market prices, defined as within +/- 100 basis points of the previous day’s benchmark prices.
- Auction Criteria: The DMO can conduct special auctions through a competitive bidding process, based on pre-announced targets.
Originally established in October 2021, the Buyback Program was a tool for retiring portions of outstanding debt ahead of maturity. These transactions are considered part of the government’s broader liability management operations.
