Karachi: In a landmark move aimed at strengthening public debt management and diversifying its investor base, the Government of Pakistan has launched its first-ever 15-year zero-coupon bond.
According to a statement issued by the Ministry of Finance on Wednesday, the government successfully raised over PKR 1.2 trillion through a major auction of government securities, which included the introduction of the 15-year zero-coupon bond — the longest-tenured instrument of its kind in the country’s history.
The newly introduced bond, issued at a yield of 12.7%, generated strong investor interest and secured over PKR 47 billion in subscriptions. Unlike conventional bonds, a zero-coupon bond does not offer periodic interest payments. Instead, investors receive a lump-sum amount at maturity, making it a tool that reduces short-term repayment pressures for the government.
“This helps the government reduce its near-term debt obligations and supports better long-term financial planning,” said the finance ministry, noting the bond’s positive reception as a signal of market confidence in Pakistan’s economic direction and ongoing fiscal reforms.
The move is part of the broader strategy to deepen domestic capital markets, reduce borrowing risks, extend debt maturity profiles, and promote Islamic and long-term financing options. According to the ministry, the average maturity of domestic debt has already improved from 2.7 years in the previous year to 3.75 years at present.
Finance Minister Senator Muhammad Aurangzeb termed the development a major milestone in Pakistan’s economic reform journey. “We are introducing innovative borrowing instruments that reduce risk while expanding choices for investors. Our objective is to responsibly manage public debt, encourage long-term investment, and support economic stability,” he said.
The finance ministry added that investor composition is also evolving, with greater participation from insurance firms and pension funds rather than relying solely on banks. This broader participation is expected to spread financial risk and encourage a more diversified, resilient debt market.
Yields on other government bonds also declined following the auction, with the 5-year fixed-rate Pakistan Investment Bond dropping by 44 basis points and the 10-year by 9 basis points — a reflection of investor optimism around expected monetary easing and declining inflation.
Looking ahead, the government plans to launch additional financial instruments, including retail-focused and Shariah-compliant products, to boost citizen participation in savings and government borrowing.
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