Khurram Schehzad calls criticism of Zero-Coupon Bond misleading

May 22, 2026 (MLN): Pakistan's government has pushed back against what it calls a misleading portrayal of its Zero-Coupon Bond programme, which says that the instrument involves raising Rs80 billion today against a repayment of Rs512 billion after 15 years,  follows an alarming debt trap rather than standard global financing principle.

The bond has drawn criticism from some quarters, with detractors framing the repayment figure as a fiscal time bomb.

However, Khurram Schehzad in his X post, says that the comparison ignores the fundamental concept of the time value of money, which underpins debt markets worldwide.

He said that without such a structure, the government would need to return to borrowing markets every year, raising Rs30–35 billion annually while facing fresh interest rate risks each time.

A zero-coupon bond eliminates that cycle entirely, a smaller sum is raised upfront, no annual interest payments are made, and the full agreed amount is settled at maturity. This reduces the risk of fluctuating interest rates.

The instrument is well-established globally. Countries including the United States, United Kingdom, Japan and Russia have issued similar bonds directly, while emerging economies such as Mexico, Brazil and Argentina have used zero-coupon or deep-discount structures in sovereign debt management.

In Pakistan's case, these bonds account for roughly 5% of total government debt and are primarily purchased by insurance companies and pension funds  institutions that have long-term future payment obligations and specifically seek instruments that grow over time.

For governments, the structure provides breathing room to finance infrastructure and development projects without the pressure of yearly repayments, allowing for smoother long-term fiscal planning.

 He stated that Financial instruments should not be assessed by headline figures alone, but within the full context of time horizons, interest rates, inflation and prevailing market conditions cautioning that stripped-down comparisons can generate unnecessary alarm without adding genuine understanding.

Copyright Mettis Link News