Pakistan’s govt debt rose to Rs. 78.24 trillion in July FY26, reflecting continued reliance on borrowing to meet fiscal needs. Year-on-year, debt increased by 12.4 percent, signaling growing financial pressures on the government.
Domestic debt reached Rs. 54.988 trillion, up 15.2 percent compared to last year and 0.9 percent month-on-month. External debt climbed to Rs. 23.25 trillion, increasing 6.1 percent year-on-year and 0.7 percent from June. Analysts attributed the rise to financing budget deficits and servicing existing liabilities.
The Finance Ministry stated that managing Pakistan’s govt debt will focus on aligning the public debt-to-GDP ratio with the Fiscal Responsibility and Debt Limitation Act. Efforts will prioritize reducing refinancing and rollover risks while securing interest savings.
Debt metrics have shown gradual improvement in recent years. The debt-to-GDP ratio declined from 74 percent in FY22 to 70 percent in FY25. The government has also reduced rollover exposure and achieved substantial interest savings.
In a historic first, the government prepaid Rs. 2,600 billion before maturity, covering commercial and central bank obligations. This early repayment strategy lowered refinancing risks and saved hundreds of billions of rupees in interest payments.
The State Bank of Pakistan (SBP) reported that tax collection by the Federal Board of Revenue rose 14.1 percent in the first two months of FY26. Additional measures, including a Rs. 2.4 trillion profit transfer from the SBP and higher petroleum levy collections, are expected to help deliver a primary surplus in Q1-FY26.
However, the SBP cautioned that recent floods could increase government spending and potentially slow revenue collection. Officials emphasized that careful management of Pakistan’s govt debt is critical to maintain financial stability and ensure sustainable economic growth.
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