The government of Pakistan has developed a new Medium-Term Debt Management Strategy to address its external financing needs in the coming years. With the support of the International Monetary Fund (IMF), the government aims to secure funding through 10- to 15-year international bonds and concessional multilateral loans. Additionally, it intends to diversify its local debt instruments by introducing inflation-linked bonds and listing government papers on the stock exchange. This strategy, covering the fiscal years 2023 to 2026, aims to enhance the stability and sustainability of the country’s debt profile.
Diversification of Debt Instruments
To achieve a more balanced and diversified debt portfolio, the government plans to introduce inflation-based bonds in the local market. These bonds will attract investors such as insurance companies, pension funds, and mutual funds, which prefer instruments that align with their liability management requirements. By broadening the range of debt instruments available, the government seeks to attract a larger investor base and offer investment opportunities that align with different risk appetites and investment horizons.
Listing on Stock Exchange
Listing government securities on the stock exchange is another initiative proposed by the Ministry of Finance. By doing so, the government aims to enhance investor outreach and facilitate trading of government securities. This move will increase transparency and accessibility, making it easier for investors to participate in the primary market and auction of government debt securities. The government expects this approach to improve retail investor participation in government securities, both in the primary and secondary markets.
Focus on Concessional Financing
The Medium-Term Debt Management Strategy emphasizes the importance of securing maximum concessional external financing from bilateral and multilateral development partners. This approach offers greater flexibility in terms of grace periods, final maturity, and amortization structure. The government intends to select financing options that provide a relatively higher average time to maturity while ensuring a smooth redemption profile for its external public debt portfolio. By accessing concessional loans, Pakistan can effectively manage its financing needs while minimizing the associated costs and risks.
Reprofiling of Commercial Loans
Efforts will be made to reprofile existing short-term commercial loans to medium and long-term tenors. This strategy aims to optimize the government’s debt structure and reduce refinancing risks. By extending the maturity of commercial loans and aligning them with the government’s repayment capacity, the overall debt profile will become more sustainable and manageable.
Mobilizing Funding through National Savings Scheme (NSS)
The government plans to increase retail investor participation in government securities through the National Savings Scheme (NSS). By leveraging digital platforms, such as the Central Depository Company (CDC), NSS certificates will be made available for purchase online. This move aims to make investment in government securities more convenient and accessible to the general public. The government also intends to explore the option of utilizing stock exchanges for primary market auctions, enabling wider outreach and greater participation from retail investors.
Projections and Macroeconomic Stability
The Ministry of Finance projects a declining trajectory for the public debt-to-GDP ratio over the medium term. With the implementation of structural reforms and improved macroeconomic indicators, the government expects increased disbursements from multilateral and bilateral creditors. Efforts to speed up project implementation and achieve macroeconomic stability are key drivers for attracting additional funding. The government aims to reduce the budget deficit and inflation while promoting economic growth through effective monetary policy and fiscal discipline.
Conclusion
Pakistan’s Medium-Term Debt Management Strategy outlines a comprehensive plan to meet the country’s financing needs in a sustainable manner. By diversifying debt instruments, accessing concessional financing, and optimizing the debt structure, the government aims to enhance its fiscal position and reduce risks. The strategy also focuses on increasing retail investor participation through digital platforms and stock exchange listings. With the implementation of these measures, Pakistan seeks to achieve macroeconomic stability, attract investment, and foster economic growth in the coming years.