Pakistan is pursuing a medium-term debt management strategy focused on extending debt maturities, diversifying financing channels and strengthening access to international capital markets, with the aim of reducing external repayment pressures and improving its sovereign credit rating. Federal Minister for Finance and Revenue Senator Muhammad Aurangzeb outlined the government’s approach during an interview with Bloomberg TV on the sidelines of the World Bank Group-IMF Annual Meetings in Bangkok, Thailand. He said Pakistan would not rush to raise funds from international markets during the current fiscal year because the country did not require immediate global borrowing to meet its external financing needs. The strategy is intended to improve the structure of existing obligations, manage refinancing risks and support the country’s progress towards a stronger credit profile without unnecessarily increasing external debt.
Aurangzeb said Pakistan had returned to international borrowing after a four-year break, raising $750 million through a private bond issuance in April and issuing $3 billion in Eurobonds around three weeks before the interview. The Eurobond offering attracted bids equivalent to twice the amount offered, with investors participating from Asia, the Middle East, Europe and the United States. The level of demand indicated renewed investor interest in Pakistan’s international debt instruments, although continued access to financing will depend on market conditions, economic performance and the country’s ability to maintain confidence among investors. The government is seeking to use this access selectively rather than relying on repeated borrowing to cover immediate financing requirements.
Pakistan has also issued $250 million in Panda bonds under a broader $1 billion programme, with additional issuances planned. Panda bonds allow foreign issuers to raise funds in China’s domestic bond market, providing an additional channel for financing. The government has also awarded mandates for Islamic Sukuk and, for the first time, dollar-payable bonds denominated in Pakistani rupees. These initiatives form part of an effort to broaden the range of instruments available to the country and reduce dependence on a limited number of funding sources. Aurangzeb also said the government was considering digital tokenisation of existing Eurobonds, an approach that could involve representing financial instruments through digital tokens. The proposal remains under consideration, and no further details about its structure or implementation timeline were provided.
A central part of the debt strategy is the planned replacement of some short-term external obligations with longer-term debt over the next two to three years. According to Aurangzeb, the objective is to reduce refinancing risks without increasing the overall stock of external debt. Shorter maturities can create pressure when substantial repayments fall due within a limited period, particularly if market financing becomes expensive or unavailable. Extending repayment periods can provide the government with greater flexibility in managing its obligations and planning future financing requirements. The success of this approach will depend on the terms available in international markets and the government’s ability to maintain access to diversified funding sources without adding excessive borrowing costs.
Pakistan’s sovereign credit rating has improved three times since April 2025 and currently remains within the B category, according to the minister. He said the country could reach a B-plus rating by the beginning of the next fiscal year if the positive trend continues, while achieving a double-B rating remains a longer-term objective. A stronger sovereign rating can influence how international investors assess a country’s ability to meet its financial obligations and may affect the cost and availability of financing. However, further upgrades will depend on sustained improvements in economic indicators, fiscal management, external stability and the government’s progress in implementing structural reforms. Aurangzeb said Pakistan was also moving away from an aid-dependent approach towards trade and investment-led economic cooperation, signalling a broader effort to strengthen commercial relationships and attract financing through economic partnerships.
Engagement with the United States remains part of that effort. Aurangzeb said discussions were continuing over tariffs and a proposed framework agreement, alongside possible cooperation with the US Export-Import Bank and the International Development Finance Corporation. Potential areas of collaboration include agriculture, information technology, minerals and mining. Pakistani and US officials have also discussed possible cooperation through the Exchange Stabilization Fund, although no agreement has been finalised. The finance minister said Pakistan would continue pursuing international capital market opportunities regardless of the outcome of these discussions. This approach reflects the government’s intention to diversify its economic relationships and financing options rather than make access to one particular arrangement a condition for future market activity.
On external stability, Aurangzeb said Pakistan’s foreign exchange reserves had reached a record $21.4 billion a few weeks earlier, providing approximately three months of import cover. He contrasted this position with the situation three years earlier, when reserves covered only about two weeks of imports. The minister attributed much of the improvement to foreign exchange purchases through the market rather than additional borrowing and expressed confidence in the stability of the Pakistani rupee. Reserve adequacy is important because it helps a country meet external payment requirements, manage volatility and maintain confidence in its ability to finance imports. Sustaining this position will require continued management of foreign currency inflows and outflows, including debt repayments, imports, exports and remittances.
The minister also highlighted the recovery in economic growth. Pakistan’s economy had contracted by 0.3% three years earlier, before expanding by 2.6% in the following year and 3.7% in the last fiscal year. The government expects growth to exceed 4% during the current fiscal year, according to Aurangzeb. He added that the government had met its tax collection targets during the July-September quarter and that the tax-to-GDP ratio had moved into double digits. Improved tax collection can help strengthen government revenues and reduce pressure on borrowing, although maintaining the gains will depend on the effectiveness of revenue measures and broader economic activity. Authorities are also monitoring the potential effects of the ongoing conflict in the Middle East on domestic inflation and economic growth.
Energy security has become another important consideration amid regional tensions. Aurangzeb said Pakistan had managed fuel procurement since the conflict began in March without shortages or queues at petrol stations. Arrangements had been made for October’s crude oil and gas requirements, while planning for November’s crude oil and liquefied natural gas imports was underway. He cautioned that a prolonged conflict could force difficult decisions about energy procurement and the allocation of national resources, making food security equally important. Pakistan’s existing stocks of urea and diammonium phosphate fertilisers, together with domestic production capacity, had placed the country in a relatively favourable position. The government has also introduced targeted subsidies for vulnerable segments to cushion the effects of the conflict, while seeking to manage the fiscal implications of such support.
Aurangzeb further said Pakistan’s engagement with the US administration and its relations of trust with Iranian leadership had helped support reconciliation efforts in Islamabad. The statement linked Pakistan’s diplomatic engagement with the broader challenge of managing regional instability and its economic consequences. For the government, the immediate priorities include maintaining energy supplies, limiting inflationary pressures, protecting vulnerable households and preserving economic growth while continuing debt management reforms. Pakistan’s target of a B-plus sovereign rating will depend not only on international market access but also on the durability of fiscal improvements, the management of external obligations and sustained economic stability. The government’s stated strategy combines longer-term borrowing, diversified financing instruments, stronger reserves and trade-oriented partnerships as it works towards these objectives.
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