Pakistan has commenced the process of issuing Eurobonds to raise $2 billion from international investors. The offering will consist of dual tranches, including five-year and 10-year bonds. This move signifies Pakistan's renewed access to global capital markets after a period of absence, with the final size and pricing of the bonds subject to market conditions and investor demand. The last time Pakistan tapped the Eurobond market was in 2021 when it raised $2.5 billion.
This re-entry into the international bond market follows recent credit rating upgrades for Pakistan. S&P Global raised its rating from B- to B on July 22, and Moody's followed on August 24, upgrading Pakistan from Caa1 to B3 with a stable outlook. These upgrades were attributed to stronger foreign exchange reserves, reduced debt costs, and consistent progress in Pakistan's IMF reform program. Fitch Ratings has assigned a 'B-' rating to Pakistan's proposed US dollar bond and Medium-Term Note (MTN) program, with a Recovery Rating of 'RR4', indicating average recovery prospects in case of default.
Citibank, Deutsche Bank, Emirates NBD Capital, MUFG, and Standard Chartered have been appointed as joint lead managers for the Eurobond deal. Roadshows are planned for London, Washington, and the Gulf region to engage potential investors. Finance Ministry Adviser Khurram Shahzad confirmed the Eurobond process, emphasizing it as part of Pakistan's re-engagement with international capital markets due to improved economic fundamentals.
Pakistan aims to diversify its external financing sources, moving away from heavy reliance on multilateral and bilateral creditors. In addition to the Eurobonds, the country plans to issue $750 million in renminbi-denominated Panda bonds in the Chinese market and is pursuing a $10 billion currency swap facility with the US to enhance investor confidence. Despite these positive developments, Fitch noted that Pakistan's rating remains exposed to external liquidity and public finance risks, with potential challenges from prolonged high oil prices or a sharp decline in remittances.
