PAKISTAN’S proposed dual-tranche Eurobond launch marks the country’s return to the international debt markets for longer-term financing. The initiative is part of a budgetary plan to raise $2bn through bond issuance for the current year. The issue will test the market’s willingness to price the country’s needs at relatively lower rates. Five months ago, Islamabad tested the waters with a three-year, $750m note at 6.975pc, oversubscribed enough to trigger the green-shoe option. A five- and 10-year bond is the next logical step to build a range of borrowing rates, instead of relying on a single benchmark. The issue follows Pakistan’s rating upgrades. S&P’s ‘B’ rating and Fitch’s ‘B-’ rating are still low. But they show the country’s better creditworthiness after years of downgrades and fears of default. The rating upgrades have given the government more room to borrow at better rates than it had in April. The real test is not whether the bonds are sold, but how much interest Pakistan has to pay compared with US rates and the country’s ‘falling’ risk premium.

The choice of longer tenor paper also answers a specific question the April bond could not: whether investors will hold Pakistani risk past the near-term IMF programme horizon. A three-year note matures inside the current programme’s shadow. A 10-year note bets on a Pakistan that is still servicing its debts in 2036, well beyond any single IMF arrangement. Investor appetite for that tenor will be the number worth watching. That said, returning to the international debt market on the strength of its improved credit rating and economic stability should help Pakistan reduce its dependence on expensive short-term commercial borrowing and repeated debt rollovers from friendly countries. None of this removes the underlying fragility, however. Pakistan is still tapping capital markets from a low base, with a speculative rating band, and with debt sustainability resting on continued IMF disbursements and growth compression. A successful issuance starts a track record, but does not establish one. The government’s own appointment of five joint bookrunners signals it wants broad distribution and a credible book. That suggests confidence in the outcome, but also that Islamabad knows this deal must go well after April’s success set a benchmark it cannot afford to fall below.

Published in Dawn, September 3rd, 2026