GMTNs and international sukuks: the financing tools Pakistan is preparing to use

Pakistan’s appointment of consortiums of international banks for its Global Medium-Term Note (GMTN) and international sukuk programmes signals more than just the selection of financial advisers. It marks a key step in preparing the country to return to international debt markets when financing needs arise.

The appointments, which are valid for three years, allow the government to work with global investment banks on potential sovereign debt issuances, including Eurobonds, international Sukuks and rupee-denominated, US dollar-settled bonds.

At the centre of the strategy is Pakistan’s Global Medium-Term Note (GMTN) programme.

A GMTN programme is essentially a pre-approved framework that enables governments and companies to issue bonds in international markets without having to establish a completely new legal and documentation structure every time they borrow. Once the programme is in place and regulatory requirements have been met, issuers can access global investors more quickly and efficiently whenever market conditions are favourable.

The GMTN itself is not a loan or a bond. Rather, it is the platform under which multiple bond issuances can take place over several years, often in different currencies, maturities and sizes.

Alongside conventional borrowing, Pakistan is also preparing to issue international sukuks.

A sukuk is an Islamic financial instrument that serves a similar economic purpose to a conventional bond but is structured to comply with Shariah principles, which prohibit interest payments. Instead of receiving interest, investors earn returns linked to underlying assets or contractual cash flows.

International sukuks allow governments such as Pakistan to tap a broader pool of investors, particularly in the Middle East and other Islamic finance markets, where demand for Shariah-compliant investments is strong.

According to the Finance Division, the latest appointments do not mean Pakistan is immediately raising funds. Rather, they are intended to establish a stable, diversified and sustainable external financing framework so the government can access international capital markets when financing needs arise.

Officials say the move also reflects improving macroeconomic conditions, stronger foreign exchange buffers, fiscal consolidation and progress on structural reforms, all of which they believe have strengthened investor confidence and improved Pakistan’s prospects of re-entering global debt markets.