Pakistan launches first 15-year zero-coupon bond, raises PKR 1.2 trillion in auction

Pakistan’s Ministry of Finance raised more than PKR 1.2 trillion in a major bond auction on Wednesday, including the successful launch of the country’s first 15-year Zero Coupon Bond, which alone fetched over PKR 47 billion.

Unlike traditional bonds, zero-coupon bonds do not pay interest annually. Instead, investors receive the full amount—principal plus interest—at maturity. This helps the government avoid short-term interest payments and manage debt more effectively over time.

“This is a major step forward in making Pakistan’s financial system stronger and more resilient,” Finance Minister Muhammad Aurangzeb said. “We are introducing new, smart ways of borrowing that reduce risk and give investors more options.”

The auction received strong demand, reflecting growing investor confidence in Pakistan’s economic stability and reforms. Yields on other government bonds also fell, which analysts say is a sign of optimism about falling inflation and a potential drop in interest rates.

The move aligns with Pakistan’s broader strategy to reduce borrowing risks by extending the average repayment period of domestic debt. According to the Finance Ministry, this period has increased from 2.7 years last year to 3.75 years now, easing short-term fiscal pressure.

Officials noted a significant shift in the investor profile as more pension funds and insurance companies, not just banks, are now participating. This diversification is expected to improve market depth and spread financial risk.

The Ministry of Finance is also developing new instruments to allow ordinary citizens, especially those interested in Islamic finance, to invest in government bonds. The goal is to promote financial inclusion and enhance national savings.

Despite global economic challenges, Wednesday’s auction indicates that Pakistan is regaining credibility in financial markets and advancing toward long-term fiscal sustainability.