Pakistan initiates issuance of Eurobond, Sukuk, dollar-settled rupee-linked bonds at global capital markets

Pakistan Finance Minister Muhammad Aurangzeb announced on Tuesday the government had initiated the process for raising new debt-financing through issuance of Eurobonds and Sukuk at international capital markets and was also launching ‘dollar-settled rupee-linked bonds’ for the first time.

For this purpose, the Ministry of Finance has issued Request for Proposals (RFPs) to global investment banks, financial institutions and other potential participants, inviting their proposals on structure of bonds including expected pricing (rate of return on bonds), and their expected bid size (value).

• A Request for Proposals is a formal invitation to investment banks and financial institutions to submit proposals for acting as arrangers, lead managers, or advisors.

This would lead to hiring advisors, lead managers, and consortia for the global bond transactions.

“We have just issued RFPs for Sukuk bonds, Eurobonds and for the first time, dollar-settled rupee-led bonds, because we do want to return to the international capital markets and extend the maturities of our international debt as we move forward,” Aurangzeb, who is also a Senator, said while speaking at the Pakistan Banking Summit 2026 (PBS’26) in Karachi on Tuesday.

“From my perspective, many of these are going to be replacement instruments. These are not going to be incremental debt that we have and how we replace some of the earlier debt will be part of the picture as we move forward.”

He said Pakistan’s return to global capital markets after four years began with a successful Eurobond placement, in which the government exercised the greenshoe option to increase the issue size to $750 million in April 2026 in response to strong investor demand.

• A greenshoe option (also known as an over-allotment option) in a Eurobond issuance is a clause in the underwriting agreement that allows the issuer (like a sovereign government or corporation) to increase the total bond size beyond the initially planned amount if investor demand is exceptionally strong.

This was followed by the country’s inaugural Panda bond of $250 million launched in May 2026. This was oversubscribed five times and secured a record-low borrowing cost for a three-year issue.

Announcing the launch of a Task Force to ensure small and medium-sized enterprises (SMEs) - the backbone and engine of the economy - get access to enhanced and required financing from banks, he said: “SMEs are not getting access to finance [largely from banks].”

“We welcome large businesses, but there has to be allocation for SMEs as well. Going forward, access to finance by SMEs cannot remain lip service and cannot be left to two or three banks. It has to be an industry-wide effort.”

The SME Finance Task Force will be led by the SBP with senior representation from the Pakistan Banks’ Association (PBA), Small and Medium Enterprises Development Authority (SMEDA), chambers of commerce and industry, and the Ministry of Finance. It will recommend practical measures to improve SME financing and broaden access to credit across the banking industry, according to the Finance minister.

From the government side, he said: “We will continue to scale up restraining partial guarantee schemes where appropriate, especially for SMEs and small farmers, to mobilise private capital. We have made allocations in this budget and will continue to step up, also subsidised financing where required, especially for the export sectors.”

The finance minister said the government had introduced new financing instruments to reduce its reliance on borrowing from domestic banks.

The government borrowing from the banking sector has long drawn criticism that it crowds out private-sector credit by leaving banks with fewer resources to lend to businesses and households. For this purpose, the SBP has launched a new digital investment platform, titled ‘InvestPak’, enabling corporate investors and individuals to directly invest in government securities like T-bills.

He also announced launching a medium-term tax strategy.

“Policy consistency is critical. God willing, in the context of this year, we are also going to come up with a medium-term tax strategy, because businesses cannot invest and cannot look forward without having a four-to five-year view of how tax policy is going to move.

“The Tax Policy Office is actively working on this, and it will be done in consultation with all stakeholders, including the business community. It is also important to focus on small businesses and the disproportionate burden that exists in certain areas,” he added.

Aurangzeb said there was a new tax administration operating model.

“The Parliament has approved the new structure. It is a new engagement model between tax administration and taxpayers, where human intervention is going to be minimised.

“The concentration of power with the income tax officer - whether assessment, orders, notices or recovery - is going to go away. This is a very fundamental change. The new model will be AI-led and technology-led, using LLM models, algorithmic learning and machine learning,” the minister said.