Pakistan plans rupee-denominated, dollar-settled bond, says Aurangzeb

After successfully raising $3 billion through a dual-tranche Eurobond sale, the government is planning to issue a rupee-denominated, dollar-settled bond as part of efforts to diversify its borrowing sources and reduce reliance on the domestic banking system, Finance Minister Muhammad Aurangzeb said on Friday.

“We have already mandated institutions who are going to work with us on this,” said Aurangzeb, while delivering a keynote address at the “Mobilising Private Capital: National Strategic Dialogue on PPPs and Privatisation” organised by the Asian Development Bank (ADB) in Islamabad.

The finance minister, however, did not provide further details on the proposed instrument, including its size, maturity or expected issuance timeline.

His remarks come shortly after Pakistan raised $1.75 billion through a 5.5-year bond at a coupon rate of 7.5% and $1.25 billion through a 10-year bond at 7.9%.

“The transaction attracted nearly $6 billion in orders — almost twice the amount issued — from a broad and diversified base of institutional investors across global markets and continents,” the ministry said in a statement.

In his address, Aurangzeb said that over-reliance on the banking system with respect to Pakistan’s borrowing needs is not sustainable, highlighting the need to deepen Pakistan’s capital markets and diversify its investor base.

He said the government was working to strengthen the debt capital market and attract institutional investors.

“We really do need to work on debt capital markets to bring a more diversified investor base, whether it’s insurance, NBFIs, to diversify out of the banking system.”

Aurangzeb also pointed to recent efforts to broaden access to government securities for retail investors, saying the Ministry of Finance had collaborated with JazzCash while the State Bank of Pakistan had launched an application allowing individuals to invest directly in government securities.

The finance minister said the government was also exploring newer financing mechanisms. Following Hong Kong’s experience, Pakistan was seeking to tokenise some of its existing Eurobond debt, he added.

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

The finance minister also said Pakistan’s foreign exchange reserves had reached $18.4 billion as of June 30, with the government targeting $21 billion by the end of the current fiscal year.

“It will take us a little over three months of import cover, which is a good international benchmark.”

Talking about the ongoing geopolitical situation, Aurangzeb said that the government is carefully watching the US-Iran conflict, “in terms of its impact on our growth and inflation projections.”

“We are not giving up, because it’s absolutely critical, not only for Pakistan or the region, but for the global economy.”