Pakistan’s Eurobond yields improve amid economic stabilization

Pakistan’s foreign exchange bonds—known as Eurobonds—saw improved yields ranging from 47 basis points to 207 basis points over the first six months of the current fiscal year. Meanwhile, domestic debt securities amounted to $782 million.

According to a report released by the Ministry of Finance on Friday, titled Semi-Annual Public Debt Bulletin, Pakistan currently has seven Eurobonds and Sukuks listed on global debt markets, totaling $6.80 billion. These bonds have maturities spanning from September 2025 to April 2051.

Yields on Pakistan's US dollar-denominated Eurobonds and Sukuks showed significant improvement throughout 2024, driven by positive economic developments, including a sustained increase in foreign exchange reserves.

These improvements have supported higher Eurobond prices. Looking ahead to FY26, the government intends to return to international capital markets, benefiting from improved credit ratings and a favorable macroeconomic environment.

The yields on Eurobonds maturing in September 2025 improved by 207 basis points (bps) to 10.24% by December 31, 2024. Bonds maturing in 2026 improved by 159 bps to 10.83%, while those maturing in 2027 rose by 101 bps to 10.79%. Bonds maturing in 2029 gained 72 bps to reach 10.29%, those maturing in 2031 improved by 96 bps to 11.03%, and bonds set to mature in 2036 increased by 47 bps to 11.38%. Bonds maturing in 2051 also improved by 47 bps, reaching 11.48%.

The report highlighted a notable surge in foreign investment in Pakistan’s domestic debt securities. Non-resident holdings of government debt securities rose to $782 million in December 2024, compared to just $4 million in December 2023. This increase was largely driven by economic stabilization and a stable exchange rate, making Pakistan’s domestic debt securities an attractive investment option.

Highlights of External Borrowing Operations During H1 FY25

External budgetary disbursements totaled $3.5 billion during the first half of FY25. Of this, $1.8 billion came from multilateral sources, $0.5 billion from commercial sources, $0.24 billion from bilateral development partners, and $0.93 billion from inflows under the Naya Pakistan Certificates.

External budgetary repayments during the first half of the fiscal year amounted to $4.268 billion. The government repaid international commercial bank loans and bilateral loans totaling $1.661 billion, while repayments on multilateral loans amounted to $1.094 billion.

In addition, China rolled over $1.0 billion in SAFE deposits for one year in July 2024, while Saudi Arabia extended $3.0 billion in deposits for another year in December 2024. Pakistan also received the first tranche of $1.02 billion under the IMF’s Extended Fund Facility Program, part of a total package amounting to $7 billion.

Unlike FY24—when net external flows contributed PKR 321 billion to deficit financing—1H FY25 saw a net outflow of PKR 78.7 billion.

Pakistan’s external debt portfolio consists largely of fixed-rate debt, accounting for 61% of total external debt stock as of December 2024. Floating-rate debt made up the remaining 39%.

The report further noted that the share of multilateral creditors increased from 53% to 56%, while bilateral creditors' share decreased from 31% to 27% year-on-year, as of December 2024. The major disbursements during this period came from IMF programs. Among multilateral lenders, the World Bank and the Asian Development Bank continued to be Pakistan’s major creditors.