- External funding to rely on multilateral, bilateral sources.
- $ 1 billion. Panda Bond Program Established, First Issuing in FY26.
- Preparatory work in progress to launch sustainable bonds.
Islamabad: Pakistan’s external debts and obligations currently standing at around $ 130 billion are heavily concentrated in five large currencies, with the US dollar alone accounting for nearly 58% of the total burden, The news Reported Thursday
“The external debt portfolio is predominantly denominated in a few larger currencies. The US dollar leads with a 57.8%share, followed by special drawing rights (SDRs) to 29.88%, Chinese Yuan 5.21%, Japanese Yen 3.95%and euro 2.62%,” Reads the Government’s latest debt management strategy (DMS) for 2026-2028.
The Ministry of Finance’s strategy emphasizes that external funding will continue to rely mainly on multilateral and bilateral sources that offer concession conditions and longer maturities.
However, in an attempt to diversify, Pakistan plans to re-enter international capital markets with new instruments, including panda bonds, sustainable bonds and Eurobonds-submitted favorable global interest rates and domestic financial stability.
A $ 1 billion Pandapanda program has already been set up with the first issue of $ 200-250 million scheduled for FY2026, followed by additional tractions in the medium term.
Preparatory work is also in the process of launching sustainable bonds, supported by a newly developed sustainable financing framework, which is currently during a cabinet review. This framework will guide the structure, maturity and reimbursement conditions for all future issues of sustainable bonds.
Although access to Eurobond markets has remained limited since 2022, the strategy is outlining a plan for re-traveling to international capital markets as conditions improve.
Meanwhile, Panda-bond-Renminbi-Erominated Securities are developed in the Chinese market-as an alternative that supports diversification of financing sources, lowers borrowing costs, reduces risk refinancing and improves Pakistan’s economic integration with Chinese markets.
To actively manage currency risks, the government intends to use coverage instruments and at the same time develop domestic futures and interest rate swap markets.
Innovative options, including debt-for-natural swaps, are considered to help control external obligations while adapting to climate goals.
The domestic debt is expected to remain the primary source of state financing during the strategy period. According to the International Monetary Fund (IMF) program, the ceiling for government guarantees is set to RS5,600 billion from the end of June 2025.
In March 2025, warranties worth RS405 billion – equivalent to 0.35% of GDP – had been issued, raising the total outstanding share to RS4,548 billion.
These include warranties expanded to state -owned companies such as TCP and Passco for raw material -related financing.
