Pakistan’s external debt repayments are set to increase in the upcoming fiscal year due to significant obligations, including the maturity of Eurobonds worth $1.5 billion. The country will face a heightened debt servicing burden as it prepares to clear these major liabilities, which will require a careful strategy to manage repayments.
As part of its financial plan for the 2025-26 budget, Pakistan will need to consider re-entering the international capital markets, exploring options such as Eurobonds, Sukuk, and Panda bonds. This will largely depend on market conditions and prevailing interest rates, particularly in the US and other global markets.Â
After successfully completing the first review with the International Monetary Fund (IMF) and receiving the second tranche of funding, Pakistan anticipates an improvement in its credit rating from international agencies. This may increase the country’s prospects for issuing bonds in the upcoming fiscal year.
Pakistan had aimed to issue a Panda bond in the current fiscal year but was unable to do so. With additional requirements to enter the Chinese market, a Panda bond issuance is now expected in the next fiscal year, likely between $200 million and $250 million.
Two significant debt obligations loom for Pakistan, with repayments due on two Eurobonds. The first, due in September 2025, is a $500 million bond launched in 2015 with a rate of 8.25%. The second repayment, worth $1 billion, will be due in April 2026, following the maturity of a bond issued in 2021 at a 6% rate for five years.
Government officials have indicated that external debt servicing is likely to rise due to these upcoming obligations, which are a key focus in the current budgetary discussions. The Economic Affairs Division and Ministry of Finance are actively reviewing the total inflows and outflows of foreign loans and grants, with a final determination on total debt servicing still being finalized.
In addition to these immediate repayments, another international bond issued in April 2021, worth $1 billion at a 7.3% interest rate, will mature in 2031. Similarly, a bond launched in January 2022 to raise $1 billion for a seven-year term will mature in 2029.
The government’s strategy for managing these payments and potential borrowings will be crucial as it navigates the challenges of rising external debt and seeks to secure favorable financial conditions in the coming fiscal year.
