The Pakistan local currency bond market plan published on Tuesday, September 29, would widen public access to treasury bills and bonds and loosen the grip commercial banks hold on sovereign debt. The Finance Division released it to meet an end-September commitment under the country’s IMF programme, on the day an IMF staff mission began its latest review in Islamabad.
The timing carries financial weight. Dawn reported that a successful review would make Pakistan eligible for about $1.2 billion: $1 billion under the Extended Fund Facility and $200 million under the Resilience and Sustainability Facility. Dawn put the likely release at the end of October or early November, and said Pakistan may need waivers from the IMF executive board for missed structural targets.
Why the Pakistan local currency bond market needs more investors
The plan’s diagnosis starts with concentration. Banks hold roughly 78 percent of government securities, and sovereign paper makes up about 62 percent of the banking system’s assets, according to figures in the document reported by Dawn and Arab News. The government says this arrangement helps it raise money at auctions but encourages banks to keep bonds rather than trade them, and leaves them less capacity and less incentive to lend to businesses.
Pakistan depends on the domestic market for most of its borrowing. Arab News reported that the plan puts domestic sources at 91.6 percent of gross government borrowing in fiscal year 2025, out of Rs34.2 trillion, or about $121 billion. The plan is built on a joint diagnostic study by the IMF and World Bank, which found that Pakistan has much of the institutional framework of an emerging market but results closer to those of a developing one. The narrow investor base was named the biggest gap.
What ordinary investors could do, and when
The headline measure would let eligible bank customers trade government securities listed on the Pakistan Stock Exchange through their banks. Dawn reported that the State Bank of Pakistan, the Securities and Exchange Commission of Pakistan, the stock exchange and the Central Depository Company would supervise it. Arab News reported that the plan targets December 2027 for this step, so nothing in the published reporting suggests exchange trading of this kind is open today.
Individuals can already buy government securities through channels such as InvestPak, Arab News noted. The plan aims to add to those routes with digital access through brokers and mutual funds and with exchange-traded funds that hold government bonds. Over the longer term it also seeks pension and insurance reforms, more foreign buyers, and eventual inclusion of rupee bonds in major global local-currency bond indices.
For a saver, the practical reading is simple. Based on the reporting, no new way to trade government securities in the Pakistan local currency bond market opens immediately, and the exchange route is a target for late 2027. Anyone interested in these securities today would be using the existing channels.
Auctions, dealers and trading rules
Much of the plan concerns how the Pakistan local currency bond market functions day to day. The government intends to tell investors in advance which range of securities it plans to sell at auctions, limit departures from those targets, and cut delays in announcing results. It also plans to publish daily trading data for conventional government securities and Sukuk, the Islamic-finance equivalent of bonds.
Primary dealers, the institutions expected to quote prices and keep the market moving, face a review. Dawn reported that the finance ministry and the central bank will revisit the dealer framework for fiscal year 2027-28, taking into account quote performance drawn from E-Bond. The plan also envisages a securities-lending facility for dealers, with its operating model, eligible securities, risk controls and fiscal cost still to be defined, and a functioning repo market, where securities are used as collateral for short-term borrowing.
What is still unresolved
The plan is a statement of intent, and its stated benefits, including lower financing costs and a dependable benchmark yield curve for private borrowers, are the government’s aims rather than results. Arab News reported that the reforms will roll out in phases over two years and beyond, with a steering committee chaired by the Finance Secretary due by November and a detailed roadmap due by December. The reporting reviewed does not detail how the legal and tax obstacles to trading and secured funding will be removed.
The IMF mission has also not announced any outcome. Dawn reported that its talks with the authorities cover the power sector, privatisation, petroleum, the Federal Board of Revenue and the auto sector, and that the finance minister briefed the team on the economy amid pressure from the prolonged Iran conflict. No IMF comment on the bond market plan had been found when this was written.
The plan also arrives while global rate expectations are moving. HCN’s earlier report on October Fed rate hike odds, PMI data and the US Treasury yield jump covers the American side of that picture. HCN will update this report as the IMF review and the Pakistan local currency bond market reforms develop.
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