Key Points
- Pakistan raised a record $3 billion through its largest-ever international bond deal.
- Investor orders nearly doubled the amount offered, reaching $6 billion.
- The deal broadens Pakistan’s external financing options
ISLAMABAD: Pakistan’s record $3 billion international bond sale enables the country to diversify its external financing, but the transaction is unlikely to end its reliance on government-to-government borrowing, particularly from China.
The dual-tranche Eurobond issued on September 3 was Pakistan’s largest-ever international bond transaction in a single deal. It attracted nearly $6 billion in orders from institutional investors across Asia, the Middle East, Europe and the United States.
The transaction comprised $1.75 billion through a 5½-year Eurobond carrying a 7.50 per cent coupon and $1.25 billion through a 10-year bond carrying a 7.90 per cent coupon.
The Ministry of Finance described the deal as a major milestone in Pakistan’s renewed access to international capital markets. Finance Minister Muhammad Aurangzeb said the diversified investor base represented renewed international confidence in the economy.
Bond marks shift from G2G to commercial market
The transaction also marks a shift in the composition of Pakistan’s external financing, although not a wholesale move away from bilateral borrowing.
Pakistan has historically relied heavily on loans, deposits and rollovers from friendly governments to meet external financing requirements.
Bilateral debt peaked at about $27.3 billion in 2022 before declining to roughly $24 billion in 2025, according to government debt data cited in recent analysis.
China has been Pakistan’s largest bilateral creditor, with Islamabad owing about $23.5 billion to Beijing as of June 2025, according to figures from the International Monetary Fund and State Bank of Pakistan.
The latest bond transaction therefore provides Pakistan with an additional source of funding rather than replacing its established bilateral financing channels.
Khurram Schehzad, adviser to the finance minister, rejected the characterisation of the bond sale as a strategy to move away from bilateral or multilateral financing.
He said the government’s objective was to diversify funding sources, broaden the investor base, extend the maturity profile and progressively reduce refinancing and rollover risks.
That distinction is important because Pakistan faces substantial recurring external financing requirements.
The International Monetary Fund projects Pakistan’s gross external financing requirements at about $123 billion over the next five years.
The size of those requirements means Islamabad will need access to multiple sources of financing, including multilateral institutions, bilateral creditors, commercial banks and international bond markets.
Government officials cited by Nikkei Asia said the proceeds would help repay a $3 billion Saudi loan due next month. Saudi Arabia extended the loan earlier this year after Pakistan repaid $3.5 billion owed to the United Arab Emirates in a lump sum in April.
The transaction also fits into the government’s broader liability-management strategy. The Finance Ministry has said it wants to extend debt maturities, reduce refinancing and rollover risks and replace shorter-term, more expensive obligations with longer-duration financing.
But commercial market access comes with a high cost. Pakistan’s new bonds carry coupons of 7.50 per cent and 7.90 per cent. It is considerably above the interest rates typically attached to some Chinese government-to-government loans, which can range from about 1 per cent to 3 per cent.
Aadil Nakhoda, an assistant professor of economics at the Institute of Business Administration in Karachi, said improved access to international markets would not significantly reduce Pakistan’s reliance on China.
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“Chinese G2G loans remain a necessity,” he said, noting that Pakistan was also seeking financing through Panda bonds and international commercial banks, including Chinese lenders.
Naafey Sardar, an assistant professor of economics at St Olaf College in the United States, warned that shifting towards market-based borrowing could increase debt-servicing costs and expose Pakistan more directly to changes in international financial conditions.
The government, however, argues that longer maturities can reduce repayment concentration and lower near-term refinancing pressure.
Pakistan’s inaugural Panda bond earlier this year and the latest Eurobond have already expanded that market access. The government is also working to make greater use of its Global Medium-Term Note programme, allowing it to return to international markets when conditions and pricing are favourable.
