By Staff Reporter
ISLAMABAD: Pakistan is asking bond investors for a longer commitment this time.
The government began marketing a dual-tranche dollar bond with five- and 10-year maturities on Tuesday, its second international debt sale this year and a bet that improving credit ratings will persuade money managers to hold its debt further out on the curve than they did in April.
Khurram Schehzad, adviser to the finance minister, said in a post on social media platform X that the offering was subject to market conditions. He tied the timing to a run of sovereign rating upgrades and what he described as strengthening macroeconomic fundamentals. Final size, pricing and yields will be set once the roadshow gauges investor demand.
Citigroup Inc., Deutsche Bank AG, Emirates NBD Capital, MUFG and Standard Chartered Plc are running the sale as joint lead managers and bookrunners.
The deal follows what has been one of the better runs in emerging-market debt this year. Pakistan’s dollar bonds have gained 24.5% this year, outperforming countries with similar credit ratings such as Egypt and Argentina, according to market analysis. Money managers including Goldman Sachs Asset Management and UBS Asset Management had said the country’s return to the Eurobond market would likely extend those gains rather than interrupt them.
That optimism carries conditions attached. Shamaila Khan, head of fixed income emerging markets & Asia Pacific at UBS Asset Management, said the outperformance would hold only as long as Islamabad stays committed to its IMF program. Søren Mørch, head of emerging markets debt at Danske Bank Asset Management, said his firm has added to its Pakistan bond holdings multiple times this year, having first bought in during the depths of the country’s financial crisis.
Tuesday’s launch is Pakistan’s second trip to international markets in five months. The government raised $500 million in April through a three-year note under its Global Medium-Term Note program at a 6.975% coupon — its first Eurobond sale in four years. Demand ran ahead of expectations, and the government exercised a $250 million green-shoe option, pushing the total to $750 million. That bond matures in April 2029.
Pakistan used the April sale, along with the repayment of a $1.4 billion Eurobond that matured the same month, to re-establish a pricing benchmark in dollar debt markets after years of depending on multilateral, bilateral and commercial lenders.
S&P Global Ratings assigned a B rating to Pakistan’s medium-term note program and the proposed notes, matching the sovereign rating. Fitch Ratings rated the program B- with a Recovery Rating of RR4, also consistent with the country’s long-term sovereign grade.
The stretch to five- and 10-year maturities marks a shift from April’s three-year structure and amounts to a test of how far out investors are willing to go. Three years was a relatively easy sell for a market still watching Pakistan’s recovery closely; a 10-year note asks investors to hold the country’s risk through multiple IMF review cycles and well past the current program’s horizon.
Pakistan’s finance ministry had flagged the scale of its ambitions in its budget documents for the current fiscal year, which set a target of $2 billion in international bond issuance. Government officials, speaking on background, said the final size of Tuesday’s offering would depend on the demand gathered during roadshows, which are expected to include stops in London, Washington and the Gulf.
The bond sale is part of a broader push to rebuild the country’s external financing position after a balance-of-payments crisis that pushed it to the edge of default. Pakistan’s foreign exchange reserves have nearly tripled, from $4.4 billion in 2023 to $17.1 billion in 2026, driven by higher dollar purchases by the State Bank and a rise in remittances from abroad.
Officials also pointed to a cluster of favourable developments outside the credit story, including progress on the Indus Waters Treaty and the strengthening of the Makkah Defence Agreement, as factors behind the timing of the launch.
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