Pakistan's Finance Minister Muhammad Aurangzeb has acknowledged that the country's corporate debt market remains underdeveloped relative to the economy's financing needs, calling for accelerated reforms to reduce reliance on bank lending and diversify funding sources for businesses. His remarks came during a meeting of the Capital Market Development Council (CMDC) focused on advancing capital market reforms. Main Developments During the CMDC meeting, Aurangzeb stressed that while the equity market has shown encouraging progress, the corporate debt market lags behind. He urged further efforts to deepen the debt capital market, reduce reliance on bank financing, and promote diversified market-based financing to create a more balanced financial ecosystem. The discussion also covered the scope of an external study on developing Pakistan's local currency-linked bond market, which is currently underway. Participants reviewed findings from awareness and experience surveys conducted by the Securities and Exchange Commission of Pakistan (SECP) on challenges faced by top-100 listed companies in accessing the corporate debt market. Aurangzeb emphasized the need to expand engagement beyond the largest firms to include medium-sized enterprises and other growth-oriented businesses that could benefit from capital market financing. Read also: Why the Red Sea threat is pushing oil to new highs The finance minister called for establishing dedicated Debt Desks at the SECP and Pakistan Stock Exchange (PSX) at senior management levels, with defined mandates and measurable performance indicators. He also urged simplifying the corporate debt issuance process through a streamlined one-window listing framework supported by standardised procedures, digital integration, and enhanced transparency. Background Pakistan's capital market has historically been dominated by equity financing, with the corporate debt market remaining shallow compared to the country's economic needs. This underdevelopment has forced businesses, particularly small and medium enterprises (SMEs), to rely heavily on bank lending for funding. The CMDC was established to coordinate reforms across regulatory bodies, including the SECP, State Bank of Pakistan, and market infrastructure providers like the Central Depository Company (CDC). Previous reform efforts have focused on improving equity market performance, but the debt market has not seen comparable progress. The ongoing study on local currency-linked bond markets aims to address this gap by examining sovereign financing, non-bank financial institutions, primary dealer arrangements, and secondary market development. International benchmarking will guide the recommendations. Why It Matters A deeper corporate debt market would reduce Pakistan's over-reliance on bank lending, which currently constrains credit availability for SMEs—the backbone of the economy. Diversifying funding sources can make the financial system more resilient to shocks and lower borrowing costs for businesses over time. For investors, a more developed bond market offers alternative fixed-income instruments, potentially broadening participation beyond traditional bank deposits. The reforms also align with efforts to expand the Islamic capital market, including deepening the domestic Sukuk market and facilitating green and sustainable financial instruments. If successful, these changes could attract foreign investment and improve Pakistan's credit profile, though implementation remains a challenge given past delays in structural reforms. What's Next The SECP and PSX are expected to establish dedicated Debt Desks with clear mandates and performance indicators. A one-window listing framework for corporate debt will be developed, with standardised procedures and digital facilitation to improve ease of access. The ongoing study on local currency-linked bonds will produce evidence-based recommendations, which the CMDC plans to translate into time-bound reform measures with defined ownership and milestones. Aurangzeb directed that future work be organized around thematic reform areas supported by dedicated working groups to accelerate decision-making and execution. Periodic progress reviews will track implementation, though specific deadlines were not announced in the meeting.