KARACHI: Government debt increased by Rs1.994 trillion, or 2.6 per cent, during the first eight months of the fiscal year 2026, indicating the continuing need for borrowing, mainly from domestic sources.
As of February, total government debt reached Rs79.9 trillion, up from Rs77.9 trillion at the end of June, according to the latest data from the State Bank of Pakistan. This represents a month-on-month increase of 0.7 per cent and a year-on-year growth of 9.4 per cent.
The majority of public debt continues to come from domestic sources, with the share of external debt decreasing steadily.Awais Ashraf, director of research at AKD Securities Limited, noted that the central government debt has increased by 2.6 per cent so far this fiscal year. This rate of growth is considerably slower compared to the 6.0 per cent increase recorded during the same period last year, attributed to government fiscal consolidation and a rise in overall revenue.
“Importantly, external debt decreased by 1.0 per cent during the same period due to strong external flows and curtailed trade deficit amid tight monetary policy,” Ashraf added.The domestic debt reached Rs56.7 trillion at the end of February, marking a 4 percent increase compared to June. When compared to January, the debt rose by 1.2 percent, and it has grown by 11.1 per cent compared to the same period last year.
The external debt stood at Rs23.2 trillion, reflecting a decrease of 0.91 per cent in the eight months of FY26. The external debt fell by 0.6 per cent compared to the previous month, but it increased by 5.4 per cent compared to February of last year.
These latest debt figures follow Pakistan’s repayment of $1.43 billion for a Eurobond that was due on April 8. This month, the country is also set to repay approximately $3.5 billion in loans to the United Arab Emirates, which analysts warn could significantly strain foreign exchange reserves and potentially weigh on the rupee.
Pakistan aims to increase its FX reserves above $18 billion by June under a $7 billion International Monetary Fund (IMF).loan programme, which requires the rollover of bilateral deposits.
Reports indicate the government is securing funds from two friendly countries to address this payment requirement. The government had requested Saudi Arabia to convert $5 billion into long-term deposits and to increase its oil facility of deferred payment to $5 billion from $1.2 billion. Thus, this could be one option to manage the outflow of $4.8 billion. In addition to borrowing from allied countries, the government may consider arrangements through swaps, along with interventions by the SBP in the FX market to purchase dollars, analysts say.
