LONDON / ISLAMABAD — In a major development for Pakistan’s debt market, JPMorgan is in the final stages of launching a new index specifically for frontier market local currency bonds.
According to reports on Wednesday, February 4, 2026, Pakistan has been identified as one of the largest “top-weighted” countries in the proposed benchmark, alongside Egypt, Nigeria, and Vietnam. This move is expected to unlock billions in passive capital inflows as global fund managers track the new index.
Key Mechanics of the Proposed Index
The new gauge targets 20 to 25 “next generation” economies that offer high yields but are currently excluded from mainstream emerging market (EM) indices like the GBI-EM.
- Target Economies: Pakistan, Egypt, Nigeria, Vietnam, Kenya, Morocco, Kazakhstan, Sri Lanka, and Bangladesh.
- Weighting Caps: To ensure diversification, JPMorgan is considering a country weight limit of either 8% or 10%. Pakistan is expected to hit this ceiling.
- Eligibility Criteria: * Bond Size: Only individual bonds with at least $250 million equivalent in local currency will be included.
- Maturity: Bonds must have more than 2.5 years of remaining life.
- Launch Timeline: A formal structure is expected by June 2026, with a potential early announcement by the end of March 2026.
Pakistan is set to be among the most heavily weighted countries in a proposed new JPMorgan index tracking frontier-market local-currency bonds, as the global bank
Read More: https://t.co/cHaguAzH3U pic.twitter.com/81QvpP1Ij1
— ProPakistani (@ProPakistaniPK) February 4, 2026
Why This Matters for Pakistan
For years, the IMF and World Bank have urged frontier economies to borrow in their own currencies (Rupees) rather than Dollars to avoid “debt traps” caused by currency devaluations.
- Reduced Sovereign Risk: By attracting foreign investors into PKR-denominated bonds, Pakistan reduces its reliance on hard-currency (USD) debt, making its debt profile more sustainable.
- Yield Attraction: Frontier market local debt has outperformed mainstream EM indices by roughly 2.5 percentage points over the last eight years. With many constituents (including Pakistan) yielding over 10%, the “pick-up” for investors is significant.
- Institutional Validation: Inclusion in a JPMorgan index acts as a “seal of approval,” signaling to global institutional investors that Pakistan’s local bond market has reached a sufficient level of liquidity and transparency.
The Emerging Opportunity: Frontier vs. Mainstream
| Feature | Mainstream EM (GBI-EM) | New Frontier Local Index |
| Typical Countries | Brazil, Mexico, Indonesia | Pakistan, Egypt, Nigeria |
| Yield Profile | Moderate (5–7%) | High (10%+) |
| Market Size | ~$3 Trillion | ~$1 Trillion (and growing) |
| Growth Potential | Mature | High (800m more people by 2050) |
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Market Sentiment: “Systematically Underpriced”
Analysts from Neuberger Berman noted that frontier market growth has been systematically underpriced by global markets. Despite housing 20% of the world’s population, these economies currently account for less than 5% of global GDP and only 3.1% of capital flows.
As confidence in “safe” developed-world debt wavers, the high-yield local currency markets of countries like Pakistan are becoming a primary destination for diversification.
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