By Staff Reporter
ISLAMABAD: Pakistan’s finance ministry rejected allegations of irregularities in the country’s recent sovereign bond sales, pushing back against a lawmaker’s claim that officials passed over a more favourable Citigroup Inc. offer in favour of banks selected without competitive bidding.
The ministry said in a statement Sunday that its $750 million Eurobond and inaugural $250 million Panda Bond both met all legal, regulatory and procurement requirements, dismissing media reports on the transactions as based on “incomplete information” that omitted critical context.
The pushback follows questions raised by lawmaker Aliya Kamran over whether Habib Bank Ltd. and Standard Chartered Bank secured mandates for three separate transactions — a $1 billion syndicated term finance facility in June 2025, the April Eurobond placement and the May Panda Bond sale — without an open tender process required under Pakistan’s 2024 procurement rules.
Kamran’s inquiry centred on the Eurobond pricing: Pakistan borrowed the $750 million at roughly 7% for a three-year term, while Citigroup had offered as much as $1 billion at 7.25% to 7.37% with a five-year maturity, according to local media reports. The Express Tribune reported this week, citing officials, that the debt was placed privately through Standard Chartered without competitive bidding, at 6.98% for three years.
The finance ministry said sovereign financing decisions cannot be judged on coupon or tenor alone. Sovereign financing decisions are highly complex and based on a comprehensive assessment of pricing, tenor, execution certainty, underwriting commitment, timing, total transaction costs, credit spread to benchmarks, prevailing market conditions and alignment with Pakistan’s Medium-Term Debt Management Strategy. The government said it selects whichever option delivers the best overall balance across those factors rather than optimising for a single metric.
Habib Bank has said separately that it received no fee for its role in the Panda Bond transaction. Officials have noted that while the federal government can raise commercial debt without competitive bidding, no such exemption applied to Eurobond issuance at the time the $750 million was raised — a distinction likely to remain central to further scrutiny of the deal.
The ministry drew a sharp line between the bank-selection questions and the legality of the transactions themselves. Administrative matters relating to institutional appointments have no bearing on the legality or governance of sovereign financing transactions, the ministry said, warning that the dissemination of inaccurate and misleading information risks undermining investor confidence, damaging Pakistan’s credibility in international capital markets, increasing future borrowing costs and prejudicing the country’s strategic financing objectives.
Debt Ratio Improves
The dispute over the bond sales comes as Pakistan points to broader gains in its debt management. The government’s debt-to-GDP ratio has fallen to an estimated 68.5% in the current fiscal year from 75.2% in fiscal 2022-23, according to a government spokesperson who briefed reporters Sunday.
Pakistan has posted primary fiscal surpluses for three straight years through fiscal 2026, the spokesperson said, while public debt growth over the first 11 months of the current fiscal year slowed to a 15-year low of 5%, down sharply from an average of 13.7% between fiscal 2011 and 2025. Debt growth peaked at 23% in fiscal 2023.
The spokesperson attributed the earlier debt buildup to fiscal financing needs rather than any change in strategy, and said a greater reliance on domestic borrowing has reduced Pakistan’s exposure to currency swings and external refinancing risk. Domestic debt now accounts for about 69% of the total, versus 31% external — within the government’s Medium-Term Debt Management Strategy target of keeping external debt below 40% of the total.
Shift Toward Longer Maturities
Pakistan has used improving macroeconomic conditions — including cooling inflation and falling interest rates — to shift domestic borrowing toward longer-dated Pakistan Investment Bonds and Sukuk, the spokesperson said. The average time to maturity on domestic debt has risen to about 3.9 years from 2.8 years in June 2024, a change officials said meaningfully reduces rollover risk.
The government said a recent increase in short-term Treasury bill issuance was a temporary response to market conditions tied to geopolitical uncertainty and shifting interest-rate expectations, rather than a change in approach.
Officials also pointed to efforts to widen Pakistan’s investor base, including the launch of JazzCash Treasury Bills, the InvestPak platform, National Savings products distributed through the Central Directorate of National Savings, the Roshan Digital Account program for overseas Pakistanis, and longer-dated as well as zero-coupon Pakistan Investment Bonds. Long-tenor bonds and Government Ijara Sukuk have drawn increased participation from insurance companies and pension funds, the spokesperson said, and the government plans to introduce short-term Sukuk with three- and six-month maturities aimed at retail investors.
The spokesperson said continued fiscal consolidation and investor diversification should gradually reduce the government’s reliance on commercial bank financing, freeing up more credit for the private sector and supporting economic growth.
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