Pakistan Plans Trillions in Borrowing to Finance Budget Deficit

The Government of Pakistan plans to borrow between Rs6.86 trillion and Rs7.02 trillion during the current fiscal year to finance its budget deficit. This borrowing strategy comes as total public debt surged to PKR 86.7 trillion by June 2026, a significant increase from PKR 49.3 trillion in June 2022.

According to the Ministry of Finance, the financing plan includes Rs6.046 trillion from domestic sources and Rs813 billion from external sources. The government expects to receive an additional Rs161 billion through privatization. External financing targets include over USD 2 billion through Eurobonds or international sukuk, with total external borrowing estimated at $13.378 billion against repayments of $10.574 billion.

To mitigate currency and interest-rate risks, the government finalized a Medium-Term Debt Management Strategy for 2026-2028. This plan prioritizes long-term fixed-rate and zero-coupon bonds, specifically shifting away from short-term treasury bills toward Pakistan Investment Bonds. The strategy emphasizes Shariah-compliant instruments, targeting Rs3.785 trillion through Sukuk and other Islamic bonds. Additionally, the government intends to refinance foreign commercial bank loans and attract investment from overseas Pakistanis via Naya Pakistan Certificates.