Pakistan targets deeper bond market

The Ministry of Finance has released a strategic plan to strengthen the local currency bond market, with goals that include more predictable debt issuance, better secondary trading and a wider investor base. Mettis Global reported that the Debt Management Office drafted the plan alongside the State Bank, SECP, PSX, CDC and NCCPL, and that it meets a commitment under the IMF-backed programme. The government said the changes aim to produce a sturdier government securities market and, in time, one for corporate debt issued in rupees.

Domestic sources supplied 91.6% of the Rs34.2 trillion the government borrowed gross in FY2025, and banks held roughly 78% of government securities. According to the plan, banks have tended to keep these instruments rather than trade them, which limits their ability to lend to private businesses. The diagnostic points to a thin investor base as the most significant shortfall, with low pension and insurance coverage and modest foreign and retail participation.

Near-term measures include target volume ranges for auctions, a fixed release time for auction results by December 2026, and daily security-level post-trade reports from SBP and PSX by June 2027. Oversight will come from a steering committee led by the Finance Secretary, and progress will be reported every six months. The reforms run in three phases, with legal and tax changes for repo and securities lending placed in the second phase, covering months 12 to 24.