Pakistan plans to return to international capital markets with an initial borrowing target of $1-2 billion within this fiscal year as the government seeks to reduce its reliance on bilateral financing and shift the economy toward trade and investment, Finance Minister Muhammad Aurangzeb has said.
Speaking with the Financial Times, he reiterated that Islamabad was seeking a $10 billion swap line from the United States as a “confidence signal” to international investors ahead of resuming external bond issuance. He said Pakistan had received “constructive engagement” from Washington on the proposed swap arrangement and expected an answer “in the next couple of months.”
The finance minister said the U.S. Export-Import Bank and the U.S. International Development Finance Corporation could play an important role in supporting Pakistan’s economic and investment agenda. “It’s a combination of engagement with the U.S. primarily to focus on trade and investment flows, and to help signaling with respect to international capital markets,” he said.
Focus on exports
Aurangzeb told the daily that Pakistan needed to move away from consumption-led growth and focus on exports to avoid recurring balance-of-payments crises. Last fiscal year, the country’s trade deficit widened to a four-year high of $39.5 billion amidst declining exports.
“If you look at our last episode where we put the foot on the pedal by pumping liquidity, going for consumption-led growth … we get into trouble very quickly because we are an import-dependent economy,” he said. “So we’re keeping a very close eye on that … more export-led growth,” he added.
The former Citibank and JPMorgan executive, who has also headed Pakistan’s Habib Bank, said the government’s broader objective was to move the country “from aid to trade and investment.” He said the U.S. ExIm Bank could potentially finance Boeing aircraft sales to Pakistan International Airlines following the carrier’s privatization, as well as support U.S. companies seeking to upgrade Pakistan’s oil refineries. The DFC, meanwhile, could participate through equity investments in Pakistani conglomerates, he said.
Balancing U.S. and China ties
Per the report, Pakistan is seeking closer economic ties with the United States while maintaining its longstanding relationship with China, which was the country’s largest bilateral creditor at around 23% of the country’s $129.7 billion in external debt in 2024.
Aurangzeb said the relationship with Washington should not be viewed as a choice between the U.S. and China, describing it as “not an and-or discussion.” However, he confirmed that Pakistan was not currently seeking additional financing from China.
The government is also seeking to capitalize on stronger political ties between Islamabad and Washington. Chief of Army Staff and Chief of Defense Forces Field Marshal Asim Munir has developed close ties with U.S. President Donald Trump and helped facilitate diplomatic efforts involving Iran.
Bond market return
As part of its planned return to international borrowing, Pakistan last month appointed banking consortiums to arrange Eurobond, Islamic sukuk and rupee-denominated, dollar-settled bond issuances. Standard Chartered and Citi are members of all three consortiums.
Aurangzeb said the timing and size of a Eurobond issue would depend on market pricing and the maturity offered, but estimated that Pakistan was considering $1-2 billion in issuance during the current fiscal year. The country also plans to appoint a consortium to arrange $750 million of renminbi-denominated “panda” bonds.
The finance minister described the planned panda bond as “very, very significant,” citing the size of China’s capital markets.
Islamabad, per the Financial Times, is also seeking further improvements in its sovereign credit ratings to reduce borrowing costs and broaden access to international investors.
S&P Global Ratings upgraded Pakistan’s sovereign rating to B last month, five notches below investment grade. Fitch Ratings has Pakistan at B-minus with a stable outlook. “At this point we are working with the rating agencies to get back to B plus over the next 12 months or so,” Aurangzeb said. “But our aim is to at least look at double B and work back from there,” he said. “And there is no reason why we cannot get there.”
The government hopes stronger reserves, fiscal consolidation, improved external balances and greater access to private capital will help Pakistan move toward more sustainable market-based financing while supporting investment and export growth.