Pakistan is preparing to return to international capital markets with plans to raise between $1 billion and $2 billion during the current fiscal year as the government seeks to diversify its external financing sources and reduce its reliance on official and bilateral lenders. Finance Minister Muhammad Aurangzeb said Pakistan is also pursuing closer economic engagement with the United States, with a proposed $10 billion swap line potentially serving as a confidence signal for international investors as the country prepares to resume borrowing from global debt markets. According to Aurangzeb, Washington has shown constructive engagement regarding the proposed arrangement, with greater clarity expected over the coming months.
The finance minister said Pakistan’s engagement with the United States is primarily aimed at increasing trade and investment flows while strengthening investor confidence ahead of the country’s planned return to international capital markets. He also highlighted the potential role of the US Export-Import Bank and the US International Development Finance Corporation in supporting Pakistan’s economic and investment objectives. Both institutions could potentially help mobilise private investment and facilitate financing for projects involving US companies, giving Pakistan additional channels through which to attract international capital.
The planned return to global borrowing represents part of a broader change in Pakistan’s external financing strategy. For years, the country has relied heavily on official and bilateral lenders, including China, to meet external financing requirements. The government is now seeking a broader mix of funding sources that includes international capital markets, foreign direct investment and private-sector financing. The strategy is intended to reduce concentration in external financing and gradually increase Pakistan’s ability to access market-based funding.
Pakistan has been working to stabilise its economy under a $7 billion, three-year International Monetary Fund programme approved in 2024. The government has reduced fiscal deficits, brought inflation down and rebuilt foreign exchange reserves as part of its economic stabilisation efforts. However, economic growth remains below the level required to meet the needs of the country’s rapidly expanding population, while poverty levels have also increased. The government has estimated GDP growth at 3.7% for FY26, highlighting the need for stronger and more sustainable expansion.
Aurangzeb said Pakistan needs to move away from a consumption-driven growth model and place greater emphasis on exports. The finance minister has argued that periods of rapid liquidity-driven and consumption-led expansion have historically resulted in stronger import demand, which subsequently creates pressure on the country’s external accounts. Pakistan’s dependence on imported goods means that higher domestic demand can quickly increase the trade deficit and create additional requirements for external financing.
The country’s trade position remains a key concern. Pakistan’s trade deficit widened to a four-year high of $39.5 billion in FY26, while exports declined. Against this backdrop, the government is maintaining close monitoring of domestic demand while seeking to build an export-led growth model that can generate stronger foreign exchange earnings and reduce recurring balance-of-payments pressures.
Aurangzeb, who previously held senior positions at Citibank and JPMorgan and served as chief executive of Habib Bank, said the government’s broader objective is to shift Pakistan’s economic model away from dependence on aid and towards greater trade and investment. He said stronger commercial relationships and increased private-sector investment would be important components of this transition, particularly as Pakistan seeks to strengthen its position in international markets.
The potential involvement of US financial institutions could support this strategy. The US Export-Import Bank could potentially finance Boeing aircraft sales to Pakistan International Airlines following the airline’s privatization and could also support US companies involved in upgrading Pakistan’s oil refineries. The US International Development Finance Corporation, meanwhile, could participate through equity investments in Pakistani conglomerates, potentially creating additional opportunities for private-sector investment and international capital participation.
Pakistan is seeking to deepen its economic relationship with the United States while continuing its longstanding relationship with China. Aurangzeb stressed that stronger ties with Washington should not be viewed as a choice between the two countries. He described Pakistan’s engagement with the United States and China as not an either-or proposition, indicating that Islamabad intends to maintain economic cooperation with both major partners.
China remains Pakistan’s largest bilateral creditor, accounting for around 23% of the country’s $129.7 billion in total outstanding external debt as of 2024, according to World Bank data. However, Aurangzeb confirmed that Pakistan is not currently seeking additional financing from China as the government focuses on diversifying its external funding sources. The strategy reflects an effort to reduce dependence on a limited number of financing partners while expanding access to international markets.
Pakistan has already begun preparations for its return to international borrowing. Last month, the government appointed separate banking consortiums under three-year mandates to arrange potential Eurobond, Islamic Sukuk and rupee-denominated, dollar-settled bond issuances. Standard Chartered and Citi are members of all three consortiums, giving the government access to international banking expertise as it evaluates the timing and structure of potential transactions.
Aurangzeb said the timing and size of any Eurobond issuance would depend on prevailing market conditions, pricing and the maturity available to Pakistan. Nevertheless, the government is considering international market borrowing of between $1 billion and $2 billion during the current fiscal year. The final amount and structure will therefore depend on the cost of borrowing and the conditions prevailing in international debt markets at the time of issuance.
Pakistan is also planning a separate $750 million renminbi-denominated panda bond, which would provide the country with access to China’s domestic capital market. A fourth banking consortium is planned for the transaction. Aurangzeb described the proposed panda bond as particularly significant because of the size and depth of China’s domestic capital markets, offering Pakistan another potential source of market-based external financing.
The planned Eurobond, Sukuk, dollar-settled rupee bond and panda bond transactions form part of the government’s broader effort to diversify Pakistan’s financing base. Rather than relying primarily on bilateral and official creditors, Pakistan is seeking to establish a stronger presence across different international debt markets. Successful access to these markets could also provide a reference point for future borrowing by Pakistani institutions and companies.
Sovereign credit ratings remain an important factor in Pakistan’s ability to access international markets at sustainable borrowing costs. The government is working towards further improvements in its credit ratings, which could help reduce financing costs and expand the pool of international investors willing to participate in Pakistani debt offerings. S&P Global Ratings upgraded Pakistan’s sovereign rating to B last month, placing the country five notches below investment grade, while Fitch Ratings currently assigns Pakistan a B-minus rating with a stable outlook.
Aurangzeb said the government is working with rating agencies with the objective of improving Pakistan’s rating to B-plus over the next 12 months. Over the longer term, the government aims to move towards the double-B category. Achieving that objective would depend on continued fiscal consolidation, stronger foreign exchange reserves, improved external balances and greater access to private capital.
The government’s strategy therefore combines economic stabilisation with efforts to strengthen Pakistan’s presence in international financial markets. Improved fiscal performance, stronger reserves and better external balances are expected to support the country’s credit profile, while increased trade, exports and private investment could provide additional foreign exchange earnings.
Pakistan’s planned return to global capital markets is consequently being pursued alongside a wider shift towards market-based financing and export-led growth. The proposed $1 billion to $2 billion international borrowing programme, potential panda bond issuance, engagement with US financial institutions and efforts to improve sovereign credit ratings are all part of the government’s attempt to broaden external financing options while strengthening investor confidence in Pakistan’s economy.
Follow the PakBanker Whatsapp Channel for updates across Pakistan’s banking ecosystem.