Pakistan is seeking US support for a $10 billion facility that Finance Minister Muhammad Aurangzeb says would help the country replace short-term bilateral borrowing with longer-term debt raised from international capital markets.

Aurangzeb said on Wednesday that the facility would not be a conventional loan or credit line. Instead, it would provide a signal of confidence in Pakistan’s currency and exchange-rate stability, helping the country access global debt markets.

Pakistan has requested the facility from the US Treasury’s Exchange Stabilisation Fund. Aurangzeb said Islamabad expects a response from Washington by the end of September.

Shift towards market-based financing

“This is not about a credit line or a loan,” Aurangzeb said, explaining that the facility would support Pakistan’s ability to raise debt from international markets.

He said the government wants to reduce its reliance on bilateral external borrowing and move towards longer-term market-based financing.

Pakistan currently owes $12.3 billion in short-term debt to Saudi Arabia, China and Kuwait. Saudi Arabia recently rolled over $5 billion until December 2028 and provided another $3 billion for three months, while China continues to roll over around $4 billion annually.

Aurangzeb thanked Pakistan’s bilateral partners for their support over the past decade but said the government wants to gradually reduce dependence on such arrangements.

Eurobonds and Sukuk plans

The finance minister said Pakistan has appointed three consortiums to arrange the issuance of Eurobonds, Sukuk and dollar-settled rupee bonds.

The government plans to explore bonds with five-, seven- and 10-year maturities as it seeks to extend the average maturity of its external debt.

Pakistan’s credit rating remains below investment grade despite a recent upgrade to B. This continues to make international borrowing relatively expensive.

The country raised a $250 million Panda bond during the last fiscal year with guarantees from the Asian Development Bank and the Asian Infrastructure Investment Bank.

Aurangzeb said Pakistan was also holding discussions with the US Export-Import Bank and the US Development Finance Corporation as part of its broader financing strategy.

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Simplified tax scheme for traders

Aurangzeb made the comments after launching a simplified tax scheme aimed at bringing more small traders into the formal tax system.

Under the scheme, eligible traders can pay income tax at 1% of annual sales, subject to a minimum payment of Rs25,000 a year. They will also receive simplified filing requirements and relief from certain compliance obligations.

The scheme covers traders operating a single shop with annual sales of up to Rs200 million.

Minister of State for Finance Bilal Kayani said traders could complete and submit the simplified return using mobile devices.

Federal Board of Revenue Chairman Rashid Langrial said the scheme could bring millions of currently non-filing traders into the tax base.

He said around 4.2 million retailers use commercial electricity connections, while trader representative Ajmal Baloch estimated that Pakistan has around 12.5 million retailers.

Government targets wider tax compliance

Aurangzeb said the government would take appropriate action against retailers who remain outside the tax system despite the new simplified scheme.

Under the programme, participating traders will receive a tax plate to display at their shops. Langrial said tax officials would not be allowed to question traders who had formally joined the scheme.

The FBR chairman acknowledged that the existing income tax return can be difficult for small businesses to understand. He said fear of harassment also discourages many traders from becoming tax filers.

Aurangzeb said the government also plans to introduce a simplified return for salaried taxpayers.

However, Langrial ruled out extending the 1% tax rate to salaried workers, noting that salaried taxpayers contributed Rs630 billion in income tax during the last fiscal year.