Pakistan has outlined a comprehensive borrowing plan of Rs6.4 trillion for fiscal year 2025-26 to manage its growing public debt, which stood at Rs81.5 trillion as of June 30, 2025. The move comes as the federal government navigates an ongoing International Monetary Fund (IMF) review of its fiscal and monetary performance, reflecting the balancing act between meeting financing needs and adhering to reform commitments.
According to the Ministry of Finance, the Annual Borrowing Plan for FY26 has been structured under the Medium-Term Debt Management Strategy (MTDS) 2026-28 and the federal budget framework. The government projects net domestic borrowing of Rs6.395 trillion, which will primarily be used to finance a federal fiscal deficit estimated at Rs6.5 trillion. Interest payments are projected to consume the bulk of expenditure, with annual debt servicing set at Rs8.207 trillion, including Rs7.2 trillion in domestic interest costs and Rs1.009 trillion in external debt obligations.
The plan reflects the heavy reliance on domestic sources of borrowing, with quarterly auction calendars guiding issuances. Key instruments include Pakistan Investment Bonds (PIBs) worth Rs4.336 trillion and Sukuks worth Rs1.895 trillion. To broaden the investor base, the government also aims to expand zero-coupon bonds and Shariah-compliant instruments such as Ijarah, Wakalah, and Murabaha. Additionally, work is underway to introduce Asset Light Sukuk (ALS) and build a Shariah-compliant yield curve to provide alternative investment avenues and deepen the domestic debt market.
On the external front, the plan estimates net financing of $364 million (approximately Rs106 billion). The focus will be on securing $1.9 billion from multilateral institutions, $4 billion in bilateral deposit rollovers from China, $5 billion in financial support from Saudi Arabia, and $400 million via Panda and Sustainable Bonds. Meanwhile, the government will also repay maturing Eurobonds worth $1.8 billion, reflecting its commitment to meeting external obligations despite fiscal pressures.
The Ministry of Finance projects gross financing needs at 21 percent of GDP for FY26, a level that underscores both the magnitude of debt servicing and the efforts underway to consolidate fiscal accounts. Authorities emphasize that fiscal discipline, coupled with gradual deficit reduction, is essential to ensure debt sustainability. The government has targeted a primary surplus of Rs1.706 trillion, in line with IMF program benchmarks, to reduce reliance on borrowing for non-development expenditures.
As of June 2025, Pakistan’s total public debt comprised Rs54.5 trillion in domestic obligations and Rs26 trillion in external liabilities. Analysts note that the government’s reliance on domestic borrowing reduces immediate exposure to foreign exchange volatility, but also adds pressure on domestic interest rates and private sector credit availability. The planned expansion of long-term, fixed-rate instruments is viewed as a positive step toward reducing rollover risks and smoothing debt maturities.
The borrowing strategy for FY26 represents not only a short-term response to financing challenges but also a broader attempt to restructure Pakistan’s debt profile. By emphasizing diversified instruments and Shariah-compliant products, the government aims to align its financing approach with market realities and investor demand while maintaining compliance with IMF program requirements.
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