Public debt surges 76pc to Rs86.7tr in four years

ISLAMABAD - The government announced plans to borrow an additional Rs6.86 trillion in fiscal year 2027 to finance a budget deficit, as total public debt surged 76% from Rs49.3 trillion at the end of June 2022 to Rs86.7 trillion by June 2026. The ministry's Annual Borrowing Plan 2027 revealed that total public debt comprised Rs59.4 trillion in domestic debt and Rs27.3 trillion in external debt, with net additional debt for the year projected at Rs6.046 trillion of domestic borrowing and Rs813 billion in external borrowing.

The total federal fiscal deficit is expected to be Rs7.020 trillion, accounting for approximately 20% of GDP for FY27. To reduce reliance on short-term treasury bills, the government will replace them with medium- to longer-term tenor instruments, issuing Rs4.58 trillion in Pakistan Investment Bonds (PIBs) with fixed-rate PIBs targeted to exceed 50% of new issuances.

Floating-rate exposure will be limited to the 10-year sukuk on a variable rate of return. The government also plans Ijara sukuk/Bai Muajjal worth Rs3.785 trillion, supported by new hybrid sukuk and short-term sukuk structures. Net external financing is projected at Rs813 billion, primarily from $1.58 billion in inflows from multilateral lenders and higher international capital market issuances.

Domestic debt prioritization will focus on fixed-rate instruments, diversification of the debt portfolio through Shariah-compliant sukuk markets, retail instruments, and long-term bonds for institutional investors.