By Qudsia Bano

Pakistan's corporate debt market remains small relative to the economy's financing requirements, limiting an important alternative source of long-term capital for businesses even as regulators introduce measures to broaden financing beyond conventional bank lending.

The Pakistan Economic Survey 2025-26 reported that only 39 corporate debt securities worth Rs133.6 billion remained outstanding as of March 31, 2026. During July-March FY2026, only six privately placed or publicly issued debt securities amounting to Rs12.45 billion were reported.

The limited scale contrasts sharply with activity in government securities. Since government debt auctions were shifted to the Pakistan Stock Exchange (PSX) platform in December 2023, the government had raised Rs5.099 trillion through PSX by March 2026, according to the Economic Survey.

The imbalance became even more visible in July, when the government's inaugural short-term hybrid Sukuk issuance raised Rs239.325 billion after attracting bids worth more than Rs770 billion in face value.

The amount raised through that single sovereign transaction was roughly 1.8 times the Rs133.6 billion stock of corporate debt securities reported as outstanding at the end of March, illustrating the difference in depth between the sovereign and corporate segments of Pakistan's debt market.

Policymakers have increasingly recognised the need to broaden the market. Finance Minister Muhammad Aurangzeb told the Capital Market Development Council that Pakistan's corporate debt market remained underdeveloped relative to the economy's financing requirements.

He called for dedicated debt desks, simplified issuance and listing processes, stronger secondary-market liquidity and reduced dependence on conventional bank financing.

Several measures introduced in recent months are aimed at addressing these constraints.

On July 6, the State Bank of Pakistan formally launched InvestPak, a digital platform allowing individuals and corporates to invest in government securities through web and mobile channels, broadening digital access to the country's debt-market infrastructure.

The Securities and Exchange Commission of Pakistan (SECP) has meanwhile stepped up measures specifically targeting corporate debt.

In August, the regulator formed a high-level working group to review corporate debt-market regulations, with particular attention to issuance complexity, costs and legal documentation.

The SECP also issued a Corporate Sukuk Guidebook aimed at standardising structures and documentation and subsequently established a dedicated Corporate Debt Market Desk to facilitate public offerings, private placements, PSX listings and Sukuk issuance.

Shariah-compliant financing has shown comparatively stronger activity. According to the SECP, 72 Sukuk issuances raised around Rs307 billion during FY2025-26, indicating growing use of Islamic debt instruments despite the broader corporate debt market's limited depth.

Speaking to Wealth Pakistan, Hamza Anwar, Equity Manager at Zahid Latif Khan Securities Limited, said Pakistan now needed to convert regulatory reforms into a regular pipeline of investable corporate securities.

He said regional markets offered investors debt securities across different maturities, sectors and credit profiles, while institutional portfolios in Pakistan remained heavily concentrated in government instruments.

More frequent corporate issuance and transparent pricing could help establish credible benchmarks for private-sector debt and provide companies with greater alternatives to conventional borrowing, he said.

Anwar said secondary-market liquidity would be equally important. Greater participation by mutual funds, pension funds, insurers and other institutional investors could create sustained demand, while market-making arrangements and stronger credit assessment could make corporate securities easier to trade.

Reducing documentation requirements and issuance costs could encourage more companies to enter the debt market, he said, but such reforms would have limited impact unless investors were also able to exit positions efficiently.

The potential for deeper bond markets is visible across Asia. The Asian Development Bank's June 2026 Asia Bond Monitor showed local-currency bonds outstanding in emerging East Asia reaching $31.5 trillion at the end of March, up 2.4% quarter-on-quarter, supported by higher government issuance.

Cross-border bond markets have also continued to attract issuers. By August, foreign borrowers had raised a record A$60 billion in Australia's kangaroo bond market in 2026, while panda-bond issuance in China reached 160 billion yuan and offshore dim-sum issuance hit 350 billion yuan.

Anwar said expanding the supply of credible corporate securities alongside a broader institutional investor base and stronger secondary-market liquidity could help Pakistan develop corporate debt into a more effective financing channel for private-sector investment.

Credit: INP-WealthPk