Pakistan Plans Rupee-Denominated, Dollar-Settled Bond

Pakistan is preparing to introduce a rupee-denominated, dollar-settled bond as part of a broader strategy to diversify its borrowing channels and reduce the country’s dependence on domestic banks, Finance Minister Muhammad Aurangzeb said on Friday.

Speaking at the Asian Development Bank’s (ADB) “Mobilising Private Capital: National Strategic Dialogue on PPPs and Privatisation” in Islamabad, Aurangzeb said institutions had already been tasked with working on the proposed financial instrument.

The finance minister said continued dependence on the banking sector to fulfil the government’s borrowing needs was not sustainable. He emphasised the importance of developing Pakistan’s debt capital markets and attracting a wider range of investors.

He said the government needed to expand participation beyond banks by bringing in investors such as insurance companies and non-bank financial institutions (NBFIs).

Aurangzeb did not provide details regarding the proposed bond’s total size, maturity period or expected launch date.

The proposed bond comes shortly after Pakistan raised $3 billion through a dual-tranche Eurobond issued on Thursday. The government secured $1.75 billion through a 5.5-year bond carrying a 7.5% coupon, while another $1.25 billion was raised through a 10-year bond with a 7.9% coupon.

The Finance Ministry said the Eurobond transaction received nearly $6 billion worth of orders from institutional investors around the world, almost double the amount ultimately issued.

The government is also working to increase participation by individual investors in government securities. Aurangzeb said the Finance Ministry had partnered with JazzCash, while the State Bank of Pakistan had introduced an application enabling individuals to invest directly in government securities.

The finance minister said authorities were also exploring alternative financing methods, including the possibility of tokenising part of Pakistan’s existing Eurobond debt, drawing on Hong Kong’s experience with similar financial technology.

“Following what Hong Kong has done, we tried to tokenise some of our existing Eurobond debt,” he said.

Aurangzeb further stated that Pakistan’s foreign exchange reserves had reached $18.4 billion as of June 30, with the government aiming to increase them to $21 billion by the end of the current fiscal year.

According to the minister, achieving that target would provide slightly more than three months of import cover, which he described as a widely recognised international benchmark.

Discussing the ongoing US-Iran conflict, Aurangzeb said the government was closely assessing its possible effects on Pakistan’s economic growth and inflation forecasts.

He stressed that efforts to address the country’s economic challenges would continue, describing stability as important not only for Pakistan and the region but also for the wider global economy.