Qudsia Bano

Pakistan has raised over Rs1.2 trillion through a major bond auction, signalling a shift in its debt management approach, reports WealthPK.

A key highlight of the auction was the launch of the country’s first 15-year zero coupon bond, which drew strong investor interest and alone secured over Rs47 billion. The bond, which pays no annual interest but instead provides a lump sum on maturity, is designed to ease short-term repayment pressures and promote long-term fiscal planning.

The auction comes at a time when Pakistan is focusing on diversifying its debt portfolio and reducing rollover risks. By extending the average maturity of domestic debt, the government aims to create greater fiscal space – a step appreciated by the financial sector participants. Shahbaz Naveed, Senior Portfolio Manager at NBP Fund Management, said the launch of the long-tenor bond is a welcome move.

“It shows the market is gradually regaining confidence in long-term economic policies. The response to the zero coupon bond proves there’s an appetite for instruments that offer long-term value, especially for institutional investors like pension and insurance funds,” he noted.

Industry data reveals that the average repayment period of domestic debt has increased to 3.75 years from 2.7 years a year ago, indicating an improvement in debt sustainability. Alongside this, yields on other government securities have seen a downward trend, suggesting investor expectations of easing inflation and interest rates.

Maryam Qureshi, an economist at the Centre for Economic Research in Pakistan (CERP), said the structure of zero coupon bond is particularly attractive for investors seeking predictable returns over a longer horizon.

“This kind of instrument supports more disciplined fiscal management and helps the government avoid periodic interest outflows, which is crucial given Pakistan’s budgetary constraints,” she said.

The broader bond auction also reflects growing interest from a more diverse investor base. While banks have traditionally dominated government debt investment, recent trends indicate a rise in participation from other financial institutions, which is helping to deepen the local bond market.

Officials indicate that more such instruments are under consideration, particularly for the retail sector, to encourage wider public participation and boost national savings.

The success of the latest auction is being viewed as a positive signal amid ongoing economic reforms, offering hope for more stable and sustainable fiscal planning ahead.

Credit: INP-WealthPk