Pakistan has unveiled a two-year plan to strengthen its local currency bond market, aiming to improve trading, widen the investor base and make government borrowing more predictable.
The Ministry of Finance said the Strategic Action Plan for the Local Currency Bond Market (LCBM) was prepared with the State Bank of Pakistan (SBP), Securities and Exchange Commission of Pakistan (SECP) and other market institutions.
The plan fulfils a commitment under Pakistan’s International Monetary Fund (IMF)-supported programme to identify barriers to the development of the rupee-denominated bond market and publish a reform roadmap by the end of September 2026.
The Finance Division said 91.6 percent of the government’s gross borrowing of Rs34.2 trillion in fiscal year 2025 came from domestic sources. Banks held about 78 percent of government securities, which made up nearly 62 percent of banking-sector assets.
The ministry said this heavy reliance on banks has helped the government raise funds but has also reduced incentives for banks to actively trade securities and lend more to the private sector.
A narrow investor base remains another major weakness. The plan noted limited pension and insurance coverage, along with low participation from foreign and retail investors, has restricted demand for longer-term bonds.
The government has set five main goals, including improving primary and secondary markets, developing private repo and securities-financing activity, attracting more investors and removing legal and tax barriers.
A new steering committee, headed by the finance secretary, will oversee the reforms. A technical group led by the Debt Management Office will track progress and report delays.
The government plans to make bond auctions more predictable by publishing target volumes and improving the timing of auction results. A fixed release time for results is expected by December 2026.
Authorities also plan to strengthen secondary-market trading by revising the primary-dealer framework, improving market data and assessing a securities-lending facility.
Retail access is also set to expand through platforms such as InvestPak, brokers, mutual funds and exchange-traded funds.
The plan includes wider pension and insurance reforms to increase demand for government securities, particularly longer-term instruments.
Several legal, tax and settlement reforms are also planned, including changes to repo rules, securities lending and the treatment of income from government securities.
Implementation will take place in three phases, beginning with market foundations in the first year, followed by major market reforms and then efforts to deepen institutional and foreign participation.
The detailed implementation roadmap is due by December 2026, while several major reforms will continue through September 2028 and beyond.