KARACHI: Pakistan on Tuesday launched its first-ever Pakistan Skills Impact Bond (PSIB), a private-capital-funded instrument aimed at financing technical training by linking investor repayments to measurable employment outcomes, as the government seeks new ways to upskill its rapidly growing workforce without relying solely on public spending.

The Rs 1 billion ($3.57 million) pilot tranche, backed by a government guarantee, is part of a three-year program designed to fund skills training through an outcome-based model, under which investors are repaid only if trainees achieve results such as certification, job placement and at least six months of employment retention.

Social impact bonds are a form of results-based financing in which private investors provide upfront capital for social programs, while governments or donors repay them only if agreed performance targets are met. Pakistan’s skills bond is intended to shift training finance away from traditional input-based budgets toward a market-oriented approach that rewards verified outcomes and crowds in private investment.

“Speaking at the event, Senator Muhammad Aurangzeb, Federal Minister for Finance and Revenue, underscored the transformational importance of the PSIB in Pakistan’s broader economic reform agenda and human capital strategy,” the finance division said in a statement. “He described the day as ‘an important moment focused on education and training,’ reiterating that Pakistan’s demographic dividend can only be realized if the country succeeds in upskilling and reskilling its youth at scale.”

The program is anchored in collaboration with the National Vocational and Technical Training Commission (NAVTTC) and is expected to evolve over time, with later tranches potentially linking repayments to a small share of trainees’ future earnings, a move officials say could help make the model financially self-sustaining.

The bond forms part of a broader government push to adopt social impact financing across priority areas including education, gender equality, health, climate resilience and poverty reduction, the statement said.

“Highlighting gender inclusion as central to the program design, the Finance Minister welcomed the recommendation led by the British Asian Trust that 40 percent of trainees under the PSIB be women, acknowledging that women’s participation and leadership in the workforce will play a decisive role in shaping Pakistan’s economic trajectory,” it added.

The Ministry of Finance has provided the initial guarantee to help establish credibility and attract investors, but has stressed the support is limited to the pilot phase.

The government has noted the model is intended to support Pakistan’s large youth population by aligning training with labor market demand, including high-value digital skills, while reducing long-term pressure on public finances.

The launch ceremony was attended by senior government officials, development partners, private sector representatives and international organizations involved in structuring and financing the bond.