KARACHI: On Tuesday, Pakistan unveiled a strategy to broaden trading in government bonds and draw in more retail, institutional, and foreign investors—including by expanding public access to government securities—to meet an end‑September structural benchmark of its $7 billion IMF bailout program.
The announcement coincides with an IMF mission visiting Islamabad for the fourth review of Pakistan’s Extended Fund Facility and the third review of its $1.4 billion Resilience and Sustainability Facility. Finance Minister Muhammad Aurangzeb opened the discussions with the visiting team on Tuesday.
The plan notes that Pakistan leans heavily on domestic borrowing to satisfy its financing requirements, with banks holding roughly 78 percent of government securities and sovereign paper comprising about 62 percent of banking‑system assets. This concentration, the strategy argues, curtails banks’ ability and motivation to lend to the private sector.
Drawing on a joint IMF‑World Bank diagnostic, the strategy aims to make government debt issuance more predictable, boost secondary‑market liquidity, attract institutional, retail, and foreign investors, and eliminate legal, tax, and infrastructure barriers to trading.
“Our vision is a deep, liquid, transparent, and diversified local‑currency bond market that reduces the cost and risk of government financing over the medium term, supports effective monetary‑policy transmission, and furnishes a reliable benchmark yield curve for private‑sector financing,” the Finance Division stated in the plan.
Pakistan secured the 37‑month, $7 billion Extended Fund Facility from the IMF in September 2024 as it sought to consolidate economic stability after edging close to sovereign default in 2023.
Under the program, Islamabad pledged to conduct a comprehensive study of bottlenecks in the local‑currency bond market and publish a strategic action plan by the end of September 2026. The IMF designated this measure as a structural benchmark intended to further develop the domestic government securities market and widen its investor base.
The Finance Division said the plan’s publication fulfills the government’s commitment under the IMF‑supported program.
In fiscal year 2025, Pakistan raised 91.6 percent of its Rs34.2 trillion ($121 billion) in gross government borrowing domestically, underscoring the vital role of the local debt market in meeting financing needs.
The strategy observes that the concentration of government securities in banks aids debt auctions but encourages lenders to hold rather than trade them, which constrains market activity and limits banks’ capacity and incentive to finance the private sector.
To make debt auctions more predictable, the government intends to publish target volume ranges and predefined allocation bands, gradually introduce targets for individual instruments, and reduce delays in announcing auction results.
The plan also calls for pension and insurance reforms to broaden the institutional investor base, expand digital investment channels for retail buyers, and renew engagement with foreign investors.
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