Bond revival

PAKISTAN has raised a record $3bn in its single largest international capital market transaction through a dual-tranche Eurobond sale that drew nearly $6bn in total orders. When international investors offer to lend a country almost twice what it is asking for and are willing to do so for as long as 10 years, they are betting that Pakistan will still be solvent, still servicing its debt, and still worth holding paper on a decade from now. That bet placed by a widespread group of institutional buyers gives yet another positive spin to the economic revival story told by the government. Two years after the country was on the verge of default, that is no mean achievement. Some practical gains from this stand out: a boost to reserves, a fresh pricing benchmark, and less reliance on bilateral rollovers. Locking in money for 5. 5 and 10 years, rather than the shorter rollovers that have dominated Pakistan’s external financing in recent years, pushes out the point at which this debt has to be refinanced. Following recent rating upgrades, this is the kind of market validation the country needed. None of that should be mistaken for cheap money, though. The coupon rates — almost equal to returns the government is paying on Roshan Digital deposits — are real, high rates in a hard currency Pakistan cannot print and is struggling to earn. For context, when Islamabad last issued dollar bonds in 2021, it borrowed five-year money at 5. 875pc and 10-year money at 7. 375pc. In other words, this deal costs more than the last comparable one did. Part of that gap can be attributed to international factors: global dollar rates have stayed higher for longer since the Fed’s tightening cycle, so every sovereign borrower, not just Pakistan, is paying more than it would have three or four years ago. But part of it is also Pakistan-specific. Investors are still charging a risk premium that an investment-grade country would not pay. That does not mean Pakistan has borrowed badly. It is just that the current ratings can only do so much in the prevailing market. Comparing Eurobond coupons across countries can be tricky because a rate that looks high for one issuer can be a bargain for another, once credit rating, tenor and the global rate environment are accounted for. Judged against peers of similar credit standing, Pakistan’s pricing sits towards the upper end of the range, which aligns with where the rating agencies currently place it: not investment grade, but no longer treated as a basket case either. The more useful test of this deal will come later: whether Pakistan can return to the market in a year or two and borrow at a lower cost than it did with this issue will be the real test. It will determine if the confidence on display is durable. Published in Dawn, September 5th, 2026

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