Finance Minister Muhammad Aurangzeb says strong demand for Pakistan’s largest-ever single bond issuance reflects renewed confidence in the country’s economic reforms.

ISLAMABAD: Federal Minister for Finance and Revenue Senator Muhammad Aurangzeb has described Pakistan’s successful $3 billion dual-tranche Eurobond issuance as a major positive development, saying strong international demand reflects renewed confidence in the country’s economy and reform agenda.

Speaking at the High-Level Dialogues on Taxation for Fiscal Sustainability, organised by the Asian Development Bank (ADB) in collaboration with the Government of Pakistan, Aurangzeb said the transaction was the largest single bond issuance in Pakistan’s history.

“Pakistan as a sovereign has printed a $3 billion bond,” the minister said, describing the transaction as evidence of external validation following improvements in the country’s sovereign credit ratings.

Aurangzeb said Pakistan had received three sovereign rating upgrades since April 2025, while the order book for the Eurobond was nearly twice the size of the amount issued.

The bond attracted nearly $6 billion in orders from investors across Asia, the Middle East, Europe and the United States.

“That shows the renewed confidence of the international investor base on the economy of Pakistan, where we are, but more importantly, where we are going,” he said.

Eurobond part of debt-management strategy

Aurangzeb said the transaction was not an ad-hoc borrowing exercise but formed part of the government’s broader external debt-management strategy.

“This is not an ad-hoc trade,” he said, explaining that Pakistan was applying a similar approach to external financing as it had adopted domestically by extending maturities, reducing rollover risks and undertaking liability-management operations.

The minister said the transaction was part of Pakistan’s three-year medium-term Global Medium-Term Note (GMTN) strategy.

Under the latest issuance, Pakistan raised $1.75 billion through a 5.5-year Eurobond carrying a 7.50% coupon, while the 10-year tranche raised $1.25 billion at a 7.90% coupon.

The Eurobond was the first issuance under Pakistan’s renewed strategic GMTN Programme, following the country’s inaugural Panda Bond and improvements in its sovereign credit profile.

Aurangzeb said the government was also considering other financing instruments, including Sukuk, rupee-denominated dollar-settled bonds and Panda bonds.

“It’s all about repaying short-term expensive debt, extending our maturities, reducing our rollover risk, so it’s very much part of the deliberate strategy,” he said.

Fiscal deficit falls to 2.6%

The finance minister also highlighted progress in reducing Pakistan’s fiscal and external structural imbalances.

He said the fiscal deficit had declined to around 2.6% of GDP by the end of June, its lowest level in 22 years, while the country had recorded three consecutive years of primary surpluses.

According to Aurangzeb, Pakistan’s twin structural deficits had stood at around 12.5% of GDP a few years ago.

He stressed that maintaining fiscal discipline would require the government to “stay the course”.

FBR reforms drive tax collection

Aurangzeb also highlighted the role of the Federal Board of Revenue (FBR) in the government’s reform agenda.

He said FBR tax collection had increased by 40% over the past two years, reaching around Rs13 trillion at the end of the previous year. The tax-to-GDP ratio, meanwhile, had improved from 8.8% to around 10.3%.

The minister said further improvements would require continued reforms in people, processes and technology, with digitalisation expected to play a central role.

He said digital production monitoring had moved from the design stage into implementation and was generating additional sales tax revenues.

Digital invoicing was also being rolled out, covering approximately 75-80% of national sales turnover in terms of registrations, he added.

Government targets higher tax-to-GDP ratio

Aurangzeb said Pakistan was determined to continue structural reforms to avoid a return to the boom-and-bust economic cycles of the past.

“The only difference this time around as compared to other boom and bust cycles is that we are very, very clear that these structural reforms have to go through,” he said.

He added that the reform agenda had the full support of the prime minister, Cabinet and political leadership.

The government is also exploring the use of artificial intelligence, integrated data and digital technologies in tax administration, although some legislative changes may be required.

Aurangzeb said raising the tax-to-GDP ratio from the current 10.3% towards 13% over time would be important for strengthening Pakistan’s fiscal sustainability.

“Our direction of travel is right. We need to do more,” he said, while appreciating the ADB’s support for Pakistan’s reform efforts.