Pakistan secures record $3bn eurobond as global demand touches $6bn

The issuance attracted nearly $6 billion in orders from international investors, representing demand almost twice the amount offered. Investors from Asia

ISLAMABAD: Pakistan has raised $3 billion through a two-tranche Eurobond transaction, marking the country’s largest-ever single international bond deal, according to documents, official records and sources familiar with the transaction.

The issuance attracted nearly $6 billion in orders from international investors, representing demand almost twice the amount offered. Investors from Asia, the Middle East, Europe and the United States participated in the transaction, reflecting stronger market interest in Pakistan’s sovereign debt.

The deal comprises a $1.75 billion bond with a 5.5-year maturity carrying a 7.50 per cent coupon and a $1.25 billion 10-year bond carrying a 7.90 per cent coupon.

The transaction marks Pakistan’s return to international bond markets under its renewed Global Medium-Term Note programme. It follows the country’s inaugural Panda Bond and a series of sovereign credit-rating improvements recorded over the past year.

Beyond raising fresh financing, the transaction is being viewed as part of the government’s broader debt-management strategy. Officials and sources familiar with the matter said the objective is to diversify financing sources, extend debt maturities and reduce refinancing and rollover pressures.

The latest issuance also lengthens Pakistan’s external debt maturity profile compared with a $750 million Eurobond issued in April 2026 and maturing in 2029. Pakistan had separately repaid a $1.4 billion Eurobond that matured in April, creating additional room for the latest market transaction.

Records indicate that Pakistan last accessed the international market with a bond of comparable size more than a decade ago, when the coupon stood at 8.25 per cent. That bond has since been repaid.

The $3 billion proceeds are expected to strengthen Pakistan’s external position and provide additional support to foreign-exchange reserves. Before the issuance, State Bank of Pakistan reserves stood at around $17.08 billion, while total liquid reserves were estimated at approximately $22.5 billion.

With the new inflow, SBP reserves are expected to move above the $20 billion mark, bringing the country closer to a three-month import-cover level.

Pakistan is facing estimated external debt servicing requirements of around $21.5 billion during the 2026-27 financial year. After anticipated rollovers from bilateral partners, the net cash repayment requirement is estimated at roughly $7 billion, meaning the new Eurobond could cover a significant portion of the financing gap.

Pakistan’s upcoming major Eurobond maturities include $1.5 billion due in December 2027, $750 million in April 2029 and $1 billion in April 2031. The latest transaction adds $1.75 billion maturing in March 2032 and another $1.25 billion due in September 2036.

The borrowing comes against a challenging fiscal backdrop. Budget documents for 2026-27 show that the government has allocated Rs8.054 trillion for interest payments, equivalent to about 46 per cent of total current expenditure and more than half of projected net tax revenues.

For comparison, defence expenditure has been budgeted at around Rs3 trillion, while federal development spending stands at approximately Rs1 trillion.

Sources familiar with discussions with the International Monetary Fund said restoring access to international capital markets was an important element of Pakistan’s economic stabilisation efforts under the Extended Fund Facility. The programme includes a primary surplus target of 2 per cent of GDP for 2026-27 and requirements relating to the State Bank’s net international reserves.

The IMF has estimated that Pakistan will require around $114.1 billion in gross external financing between 2026 and 2030.

The Debt Management Office led the execution of the transaction, with five international banks serving as joint bookrunners. Strong demand for the 10-year bond was particularly notable, with market participants viewing investor appetite for the longer maturity as a sign of improving confidence in Pakistan’s medium- and long-term economic outlook.

However, the latest borrowing also underscores the need for continued structural reforms. Sources said Pakistan will need to strengthen domestic revenue mobilisation, raise exports and attract greater foreign direct investment if it is to reduce dependence on commercial external borrowing.

With more than 85 per cent of the government’s interest burden linked to domestic debt, a decline in the State Bank’s policy rate could also provide substantial fiscal relief. Sources estimate that every 100-basis-point reduction could potentially save the government around Rs250-300 billion annually, depending on the structure and repricing of outstanding debt.

The successful Eurobond sale provides Pakistan with additional financial breathing space, but analysts and officials are expected to closely monitor whether improved market access can be converted into sustainable economic gains and a lower dependence on debt financing.