Pakistan eyes $1–2bn return to global capital markets

August 25, 2026 (MLN): Pakistan is seeking to strengthen its access to international financing through closer economic engagement with the United States while preparing to return to global capital markets with borrowing of between $1 billion and $2bn during the current fiscal year.

Finance Minister Muhammad Aurangzeb said a proposed $10bn swap line with the US could serve as a confidence signal for international investors as Pakistan prepares to resume borrowing from global debt markets, according to Financial Times.

The government has received constructive engagement from Washington regarding the proposed swap arrangement and expects greater clarity over the coming months.

Muhammad Aurangzeb said Pakistan's engagement with the US is primarily focused on expanding trade and investment flows while also strengthening investor confidence in the country's planned return to international capital markets.

He added that the US Export-Import Bank and the US International Development Finance Corporation could play an important role in supporting Pakistan's economic and investment agenda, with both institutions potentially helping mobilize private investment.

The government's broader strategy marks a shift toward diversifying Pakistan's external financing sources after years of significant reliance on official and bilateral lenders, particularly China.

Pakistan has been working to stabilize its economy under a $7bn, three-year International Monetary Fund programme approved in 2024. The country has reduced fiscal deficits, brought inflation down and rebuilt foreign exchange reserves.

However, economic growth remains insufficient to meet the needs of Pakistan's rapidly expanding population, while poverty levels have also increased. The government estimates GDP growth at 3.7% for FY26.

Muhammad Aurangzeb said Pakistan needs to move away from consumption-driven growth and focus more strongly on exports to avoid recurring balance-of-payments pressures.

Pakistan's trade deficit widened to a four-year high of $39.5bn in FY26, while exports declined.

The finance minister noted that periods of rapid liquidity-driven and consumption-led expansion have historically increased imports and quickly created external financing pressures because of Pakistan's dependence on imported goods.

The government is therefore maintaining a close watch on domestic demand while pursuing a more sustainable, export-led growth model.

Muhammad Aurangzeb, who previously held senior positions at Citibank and JPMorgan and also served as chief executive of Habib Bank, said the government's broader objective is to shift Pakistan's economy from reliance on aid toward greater trade and investment.

The US ExIm Bank could potentially finance Boeing aircraft sales to Pakistan International Airlines following the airline's privatization and support US companies involved in upgrading Pakistan's oil refineries.

Meanwhile, the DFC could participate through equity investments in Pakistani conglomerates, potentially supporting greater private-sector investment.

Pakistan is seeking to expand economic cooperation with the United States while maintaining its longstanding relationship with China.

The government's efforts come amid stronger political engagement between Islamabad and Washington, including close ties developed between Field Marshal Asim Munir and US President Donald Trump, as well as Pakistan's involvement in facilitating diplomatic engagement concerning Iran.

Muhammad Aurangzeb maintained that stronger ties with Washington should not be viewed as a choice between the US and China, describing Pakistan's engagement with the two countries as not an either-or proposition.

China remains Pakistan's largest bilateral creditor, accounting for around 23% of the country's $129.7bn in total outstanding external debt as of 2024, according to World Bank data.

However, Muhammad Aurangzeb confirmed that Pakistan is not currently seeking additional financing from China as the government looks to diversify its sources of external funding.

As part of its planned return to international borrowing, Pakistan last month appointed separate banking consortiums under three-year mandates to arrange potential Eurobond, Islamic sukuk and rupee-denominated, dollar-settled bond issuances.

Standard Chartered and Citi are members of all three consortiums.

Muhammad Aurangzeb said the timing and size of any Eurobond issuance would depend on market conditions, pricing and the maturity available to Pakistan. However, the government is considering between $1bn and $2bn in international market borrowing during the current fiscal year.

A fourth consortium is also planned for the issuance of $750 million in renminbi-denominated panda bonds, providing Pakistan with access to China's domestic capital market.

Muhammad Aurangzeb described the planned panda bond as particularly significant given the size and depth of China's capital markets.

The proposed return to global debt markets represents an important step in Pakistan's efforts to diversify its external financing and gradually reduce dependence on bilateral and official creditors.

Pakistan is also working toward further improvements in its sovereign credit ratings to reduce borrowing costs and broaden its access to international investors.

S&P Global Ratings upgraded Pakistan's sovereign rating to B last month, placing it five notches below investment grade. Fitch Ratings currently rates Pakistan at B-minus with a stable outlook.

Muhammad Aurangzeb said the government is working with rating agencies to improve the country's rating to B-plus over the next 12 months.

However, Pakistan's longer-term objective is to move toward the double-B category, supported by continued fiscal consolidation, stronger foreign exchange reserves, improved external balances and greater access to private capital.

The government hopes these measures will support a transition toward more sustainable, market-based financing while strengthening investment, trade and export-led economic growth.

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