ISLAMABAD: Pakistan is eyeing a rupee-denominated bond dollar settled bond and aims to tokenize its Eurobond debt, Finance Minister Muhammad Aurangzeb said on Friday, as Islamabad seeks to leverage its digital financial instruments and diversify external funding sources to strengthen its foreign reserves.

The announcement comes a day after Pakistan’s finance ministry announced that it had raised $3 billion from issuing Eurobonds in the international market. Pakistan has announced plans to diversify the way it raises funds from international capital markets, such as through rupee-denominated bonds, as it aims to strengthen its economy under a $7 billion International Monetary Fund (IMF) loan program.

“There are two other things which we are going to try and move forward with,” Aurangzeb said at an event in Islamabad. “One is a rupee-denominated dollar settled bond. And we have already mandated institutions who are going to work with us on this.”

He said the government was also trying to tokenize some of its existing Euro bond debt. Tokenization involves creating digital representations of conventional assets on blockchain or similar distributed-ledger infrastructure, potentially allowing financial instruments to be issued, traded and settled digitally.

Speaking about Pakistan’s macroeconomic conditions, the minister said Pakistan was targeting a GDP growth rate of over four percent for this fiscal year. He said Pakistan’s foreign exchange reserves stood at $18.4 billion on Jun. 30, adding that the government wants it to rise to $21 billion by the end of fiscal year 2027.

“So it’ll take us a little over three months of import cover, which is a good international benchmark,” Aurangzeb noted.

However, he said there were some external factors that should be kept in mind as well, the most important being the ongoing United States (US) and Iran war in the Middle East. The conflict has pushed global prices of oil higher, dealing a blow to countries such as Pakistan who rely heavily on the Middle East for its fuel needs.

“The conflict, which is still ongoing, is something which we, the governor and myself, are watching very carefully in terms of its impact on our growth projections, and the impact on our inflation projections,” the minister said.

Aurangzeb spoke about Pakistan’s ongoing drive to privatize loss-making state-owned enterprises (SOEs), saying they were “beyond repair.”

Islamabad sold its national airline to a business consortium led by the Arif Habib Group in December last year. The move was part of Islamabad’s efforts to introduce private management into SOEs that have caused billions of losses over decades to the national kitty. Pakistan plans to privatize power distribution companies IESCO, FESCO and GEPCO in the months to come under the same program.

Aurangzeb said Pakistan has given 27 state firms to the Privatization Commission for their sell-off.

“We decided to close them down. Whether it was Utility Services Corporation, whether it’s PASSCO [Pakistan Agricultural Storage and Services] , whether it’s PWD [Public Works Department], these are tough decisions,” he said.

“But you have to move on as we go forward.”

Islamabad has sought to introduce long-term financial reforms after it came to the brink of a sovereign default in 2022 as it suffered a balance of payment crisis. Since then Pakistan has removed subsidies from food and fuel items, privatized SOEs and undertaken reforms in the energy sector as mandated by the IMF.