Govt Plans Rs. 6,046 Billion Domestic Borrowing, Shifts Away From Short-Term Debt

The Pakistani government plans to finance approximately 75% of its fiscal deficit through domestic borrowing, totaling Rs. 6,046 billion. The strategy aims to decrease dependence on short-term debt by favoring longer-term financing options to manage debt servicing and refinancing risks. A significant portion of this domestic borrowing, Rs.

2,592 billion, will be allocated to retiring short-term debt, primarily Treasury Bills, which will be replaced with longer-dated instruments. Additionally, the government intends to issue Pakistan Investment Bonds, with a projected net issuance of around Rs. 4,580 billion. Fixed-rate bonds will make up more than 50% of these new issuances.

The government will also cap floating-rate debt, retaining the 10-year Sukuk Variable Rental Rate instrument as the sole floating rate instrument. The Sukuk expansion strategy targets a gross issuance of approximately Rs. 6,600 billion, encompassing new hybrid Sukuk instruments and various Sukuk maturities. The government plans to restructure National Savings schemes, enhance market-based pricing, and facilitate digitalization for retail investors.

External borrowing is projected to bring in a modest net inflow of $2.8 billion (Rs. 813 billion), primarily from multilateral development partners. This inflow will be used for deficit financing, while external repayments amount to Rs. 17 trillion. The government also plans to reintroduce international capital markets through Eurobonds and international Sukuk issuances, returning to markets after issuing $3 billion worth of Eurobonds.

Efforts to diversify financing sources include exploring Panda Bonds and initiatives to channel foreign portfolio investment into domestic bonds.