Capital market reforms move toward broader debt financing

January 30, 2026 (MLN): Efforts to deepen Pakistan’s capital markets, expand debt financing beyond banks and lower intermediation costs are being aligned under a broader, system wide reform agenda led by the Finance Division in coordination with market regulators.

These priorities were reviewed during a meeting at the Finance Division between the newly appointed leadership of the Securities and Exchange Commission of Pakistan (SECP) and the Federal Minister for Finance and Revenue.

The meeting was also attended by senior officials responsible for debt management, capital market development, and regulatory coordination.

The engagement centered on strengthening the regulatory framework to enhance investor confidence by promoting efficient regulation, modern market infrastructure, and coordinated policy action for capital market development, according to the press release.

Discussed the government’s move toward an integrated reform approach through the Capital Markets Development Council, following the finalization of its terms of reference.

The objective is to shift from institution-specific initiatives toward a horizontal market development agenda, leveraging progress already achieved while addressing gaps requiring regulatory reform, legislative support, and inter-agency coordination.

Development of Pakistan’s debt capital markets emerged as a key priority, with emphasis on reducing reliance on banks as the primary source of financing.

The discussion also highlighted the need to broaden participation by insurance companies, asset managers, pension funds, and retail investors in line with asset-liability management practices.

Ongoing work to strengthen domestic debt management through improved front, middle, and back office functions and liability management operations was also reviewed.

Participants identified high friction and intermediation costs as a major constraint, noting that multiple layers in the issuance-to-investor chain add cost and delay.

Streamlining market architecture, improving issuance processes, and strengthening secondary market functioning were identified as necessary steps to improve market efficiency.

Investor onboarding and market access were discussed as critical enablers of liquidity.

Proposals reviewed included faster digital account opening, risk-based know-your-customer requirements, and consent-based KYC portability across financial institutions, with a focus on easing entry for retail investors into the formal capital market.

Regulatory frameworks for non-bank financial companies, SME-focused finance, and insurance were also reviewed.

The SECP leadership shared initial observations on the need to revisit and strengthen these frameworks to support access to finance while maintaining prudential oversight and reducing procedural delays through digital tools.

On the equity market, participants noted improving IPO activity.

They also discussed measures to broaden participation in equity capital market transactions, including expanding the pool of institutions supporting capital raising and ensuring sufficient market infrastructure capacity.

Alternative investment vehicles were discussed as a channel for mobilizing private capital for infrastructure and priority sectors, alongside policy and tax-related challenges affecting private equity and venture capital and concerns over passive fund structures.

The role of public capital markets in the government’s privatization agenda and exploratory work on digital assets, including the potential tokenization of government debt, were also reviewed, with emphasis on regulation, investor education, and institutional capacity.

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