ISLAMABAD: The Ministry of Finance has raised more than Rs1.2 trillion through a significant auction of government bonds. A highlight of this auction was the introduction of a new 15-year Zero Coupon Bond, a first in Pakistan, which garnered robust investor interest and raised over Rs47 billion.
Unlike traditional bonds that pay annual interest, the Zero Coupon Bond provides investors with a lump sum payment at maturity after 15 years. This approach helps the government manage short-term repayments more effectively and enhances financial planning. The enthusiastic response underscores investor confidence in Pakistan’s economy and ongoing reforms.
This initiative is part of the government’s broader strategy to mitigate borrowing risks, extend debt repayment timelines, and promote Islamic financial products and long-term investments. Yields on other government bonds also declined, reflecting optimism in financial markets about anticipated reductions in inflation and interest rates.
Pakistan’s debt profile is now more stable, with the average repayment period for domestic debt increasing from 2.7 years last year to 3.75 years presently, easing pressure for quick loan repayments.
Moreover, a growing number of pension funds and insurance companies are investing in government bonds alongside banks, diversifying financial risks and broadening the local investor base.
— ALSO READ —
Punjab introduces special green number plates for electric vehicles
Finance Minister Senator Muhammad Aurangzeb commented, “This marks a significant stride towards strengthening Pakistan’s financial system.
We are introducing innovative borrowing methods that mitigate risks and offer investors more choices. Our goal is to manage public debt responsibly, promote Islamic finance, and attract greater long-term investments to support economic growth.”
Additionally, the Ministry of Finance is developing new financial products to enable ordinary citizens, especially in Islamic finance, to invest in government bonds, thereby encouraging savings and fostering financial inclusion. Despite global uncertainties, this auction underscores growing investor confidence in Pakistan’s economy and its positive trajectory.
In a related development, the Ministry of Finance secured a five-year, \$1 billion long-term financing facility, as announced in a government statement. Dubai Islamic Bank (DIB) served as the primary Islamic global coordinator, with DIB and Standard Chartered Bank acting as the lead arrangers and bookrunners.
“The Ministry of Finance has signed a syndicated term finance facility of \$1,000 million partially guaranteed by a Policy-Based Guarantee of the ADB Programme ‘Improved Resource Mobilisation & Utilisation Reform’,” the press release stated.
“This facility is a landmark transaction for the Government of Pakistan, demonstrating strong support from leading financiers in the region. It comprises a multi-tranche, five-year facility with both Islamic and conventional tranches,” it added.
— ALSO READ —
New levy to run Daanish University in Islamabad
The finance ministry highlighted that the Islamic facility adheres fully to AAOIFI standards, accounting for 89 percent of the total financing, while the remaining 11 percent is conventional financing.
“This transaction also marks the first facility supported by the ADB’s Policy-Based Guarantee linked to policy reform measures by an ADB member country, namely Pakistan.”
“The ADB programme aims to bolster Pakistan’s long-term fiscal resilience and stability and has facilitated Pakistan’s re-entry into international commercial markets, drawing significant interest from Middle Eastern banks,” the press release concluded.
Meanwhile, the ministry celebrated another successful government bond auction, raising over Rs1.2 trillion, which included the introduction of the pioneering 15-year Zero Coupon Bond that garnered substantial investor interest, raising over Rs47 billion.
