Pakistan plans fresh borrowing as public debt continues to rise
Pakistan aims to borrow PKR 6.86 trillion in FY 2026-27 as total public debt hits PKR 86.7 trillion, according to recent reports.
The Pakistani government is preparing to tap into new credit markets to address a widening budget deficit, even as the nation's total public debt continues its steep upward trajectory. According to a report by Dawn, Islamabad intends to secure approximately PKR 6.86 trillion in additional borrowing during the 2026-27 fiscal year.
A massive surge in national debt
The necessity for fresh capital comes as the country's financial obligations have expanded dramatically over a short period. Data from the Ministry of Finance’s Annual Borrowing Plan 2027 reveals a staggering increase in the nation's liabilities:
- June 2022: Total public debt stood at PKR 49.3 trillion.
- June 2026: Total public debt climbed to PKR 86.7 trillion.
This total figure encompasses both domestic obligations and external liabilities, reflecting the mounting pressure on the country's fiscal stability.
Shifting the borrowing strategy
In an effort to stabilize its financial profile, the government is looking to move away from a heavy reliance on short-term treasury bills. Instead, the new strategy will prioritize medium- and long-term financing to better manage the debt structure.
To achieve this, authorities plan to utilize several key instruments:
- Pakistan Investment Bonds: Increasing the use of these longer-term instruments.
- Retail and Institutional Engagement: Encouraging participation through National Savings Schemes and zero-coupon bonds.
- Naya Pakistan Certificates: Seeking to attract investment from overseas Pakistanis.
Seeking international capital
On the global stage, Pakistan is looking to diversify its funding sources. While the government intends to maintain its relationship with multilateral lenders, it is also eyeing international capital markets for more direct access to funds.
The government has set a target to raise more than USD 2 billion through Eurobonds or international sukuk during the upcoming fiscal year, though this remains contingent on prevailing market conditions. Additionally, the plan includes refinancing existing foreign commercial bank loans and engaging with international credit rating agencies to manage debt buybacks and exchanges.
The continuous need for massive borrowing highlights the growing challenge Islamabad faces in meeting its fiscal obligations and sustaining essential government expenditure amidst a rapidly growing debt mountain.