The federal government has projected gross financing needs of Rs. 28.647 trillion for fiscal year 2026-27, with most of its financing requirements expected to be met through domestic borrowing.
Under the Annual Borrowing Plan prepared by the Debt Management Office, the government has assumed an exchange rate of Rs. 290 per US dollar for FY27. The plan outlines how Pakistan intends to finance its fiscal deficit, refinance maturing debt and gradually reduce its reliance on short-term borrowing.
The government has projected a Rs. 7.02 trillion fiscal deficit for the fiscal year. Of this amount, around Rs. 6.046 trillion is expected to come through net domestic borrowing, while net external financing is projected at Rs. 813 billion. Another Rs. 161 billion is expected through privatization proceeds.
Government Focuses on Longer-Term Borrowing
A major feature of the borrowing strategy is the government’s plan to reduce its dependence on short-term Treasury Bills.
The government intends to increase borrowing through medium- and long-term instruments to reduce refinancing risks and extend the average maturity of its public debt portfolio.
Net issuance of Pakistan Investment Bonds (PIBs) is projected at around Rs. 4.58 trillion. Fixed-rate PIBs are expected to account for more than half of the new issuances planned during the fiscal year.
The government also plans to raise financing through Islamic instruments, including Government Ijara Sukuk, Bai Muajjal and short-term Sukuk.
Around Rs. 3.785 trillion is expected through Sukuk-related instruments, while gross Sukuk issuance could reach approximately Rs. 6.6 trillion during FY27.
New Long-Term Bonds Planned
The borrowing plan also includes several changes to the government’s debt instruments.
The government plans to introduce a 20-year fixed-coupon bond following consultations with relevant stakeholders. It also intends to replace the existing 10-year zero-coupon floating-rate instrument with a 10-year fixed-rate instrument.
These measures are part of the broader strategy to diversify government borrowing and increase the share of longer-term financing.
The government also plans to introduce Hybrid Sukuk along with three-month and six-month short-term Sukuk instruments.
Rs. 21.6 Trillion Debt Maturities
Pakistan’s borrowing requirements are also being driven by substantial debt repayments falling due during FY27.
The government faces around Rs. 21.627 trillion in debt maturities during the fiscal year. These include approximately Rs. 17.096 trillion in domestic maturities and Rs. 4.531 trillion in external repayments.
When these repayments are combined with the projected fiscal deficit, the government’s total gross financing requirement reaches Rs. 28.647 trillion.
Domestic debt maturities include around Rs. 11.1 trillion in Treasury Bills, Rs. 3.1 trillion in PIBs and approximately Rs. 1.9 trillion in Government Ijara Sukuk.
A significant portion of Treasury Bill maturities is scheduled during the first two quarters of FY27, increasing the government’s refinancing requirements early in the fiscal year.
External Financing Requirements
For external financing, the government has projected net external financing of approximately $2.804 billion.
Multilateral institutions are expected to provide a net inflow of around $1.58 billion, while the government plans to raise approximately $2 billion through international bonds, subject to favorable conditions in international financial markets.
Total external inflows are estimated at $13.378 billion, compared with projected outflows of $10.574 billion.
The government also plans to refinance existing foreign commercial bank loans and explore additional financing options where better terms and pricing are available.
External Debt Repayments
External debt repayments remain a significant component of Pakistan’s financing requirements.
External debt principal maturities are estimated at approximately $15.6 billion during FY27. This includes around $7 billion in bilateral deposits that are expected to be rolled over.
Multilateral debt maturities are projected at approximately $5.3 billion, while commercial lender maturities are estimated at around $3.3 billion.
The borrowing plan does not include any Eurobond maturities during FY27.
Public Debt Reaches Rs. 86.7 Trillion
Pakistan’s total public debt stood at approximately Rs. 86.7 trillion at the end of June 2026, according to the borrowing plan.
Of this amount, around Rs. 59.4 trillion consisted of domestic debt, while Rs. 27.3 trillion was external debt.
The Debt Management Office said the average maturity of Pakistan’s debt portfolio has increased in recent years.
The average maturity rose from 2.7 years in June 2024 to 3.8 years in June 2026, with the government targeting an average maturity of 4.2 years by FY28.
A longer average maturity can reduce the frequency with which the government needs to refinance maturing debt.
Debt Management Operations Continue
The government also plans to continue liability management operations, including debt buybacks and switches.
According to the borrowing plan, transactions worth approximately Rs. 4.7 trillion have already been conducted since September 2024.
Under the FY27 strategy, Market Treasury Bills are expected to record negative net issuance of Rs. 2.592 trillion. Meanwhile, PIBs are projected to record net issuance of Rs. 4.58 trillion, while Sukuk-related instruments are expected to have net issuance of Rs. 3.785 trillion.
The shift reflects the government’s stated objective of increasing the role of longer-term and Islamic financing instruments while reducing exposure to short-term refinancing pressures.
National Savings and Retail Participation
The borrowing plan also proposes restructuring the Central Directorate of National Savings.
The proposed changes include improved savings products, market-based pricing and greater digitization.
The government also intends to increase retail participation in government securities, potentially giving individual investors greater access to government borrowing instruments.
Exchange Rate and Economic Conditions
The assumption of Rs. 290 per dollar is an important component of the FY27 borrowing framework because changes in the exchange rate can affect the rupee value of external debt and financing requirements.
The Debt Management Office has cautioned that successful implementation of the borrowing plan will depend on the broader macroeconomic and geopolitical environment, as well as continued fiscal discipline.
The government will therefore need to manage both domestic refinancing requirements and external repayment obligations while attempting to extend the maturity profile of public debt.
With gross financing needs projected at Rs. 28.647 trillion, FY27 will require substantial borrowing and debt-management operations. The government’s strategy places greater emphasis on PIBs, Sukuk and other medium- and long-term instruments while seeking to limit the accumulation of short-term debt.
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