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Aftab Maken
ISLAMABAD: Pakistan said it plans to return to the global bond market after a four-year gap, highlighting progress in stabilizing its economy since near-default pressures a few years ago. The government aims to attract foreign investment as part of broader fiscal and structural reforms.
Pakistan will seek advisers for its bond issuance in the coming weeks, Finance Minister Muhammad Aurangzeb told Bloomberg. The government is weighing options including dollar, euro or sukuk bonds and plans to issue its first panda bond shortly. Aurangzeb spoke on the sidelines of the World Economic Forum in Davos, where officials are pitching Pakistan’s improving economic landscape to global investors, especially in minerals, agriculture and technology sectors.
The planned return marks a significant step for a country that was effectively shut out of international debt markets in 2022 amid deep balance-of-payments strain and fears of sovereign default. Since then, Islamabad has implemented tight fiscal and monetary policies under a roughly $7 billion Extended Fund Facility (EFF) with the International Monetary Fund, which has helped curb inflation and rebuild confidence. Pakistan has also completed multiple IMF programme reviews, triggering fresh disbursements of funds.
Economic indicators have shown marked improvement, with inflation retreating sharply from peaks near 40 percent to single digits as of 2025, while foreign exchange reserves climbed to over $14.5 billion by the end of the 2025 fiscal year, surpassing IMF targets. The State Bank of Pakistan’s cautious monetary policy helped anchor price expectations even as global commodity prices fluctuated and climate-related shocks, including severe floods, disrupted supply chains.
Aurangzeb said foreign exchange reserves are expected to cover three months of imports — a widely used benchmark for external stability — and noted that the rupee has remained stable for nearly 18 months. He cited strong remittance inflows, a healthier balance of payments and growth in services exports as supporting the currency’s resilience. Investors see the stabilization as a key step toward restoring Pakistan’s creditworthiness abroad.
The bond strategy is part of a broader economic overhaul that includes privatizations and tax-base expansion. The government sold the national flag carrier in late 2025 and is pursuing sales of stakes in overseas assets such as the Roosevelt Hotel in New York, along with plans to outsource major airport operations and divest other state-owned enterprises. Aurangzeb stressed that shifting to export-led growth is essential to avoid the import-driven expansions that previously triggered balance-of-payments crises.
While international credit rating agencies such as Fitch acknowledge progress in stabilizing the economy and rebuilding external buffers, they warn that structural reforms remain critical to long-term sustainability. Pakistan’s growth has been modest, with the World Bank projecting around 2.7 percent growth in the fiscal year ending June 2025, even as inflation and fiscal deficits ease.
Pakistani officials view the anticipated bond issuance as a test of market confidence after years of crisis and as a way to diversify external financing sources beyond official lenders. If successful, the return could improve liquidity and investor sentiment, which has already lifted local markets and strengthened the case for further reforms. Nevertheless, risks remain, including lingering structural weaknesses, external vulnerabilities, and geopolitical tensions that could affect investor appetite.
In issuing global bonds and a panda bond, Pakistan aims to signal improved macroeconomic stability and open doors to more sustainable financing, aligning with international reform commitments and its goal of sustained, inclusive growth.
