KARACHI: Pakistan’s central government debt increased by Rs6.8 trillion, or 9.3 per cent year-on-year (YoY) in March, as the government increased its domestic borrowing to meet financing needs, data from the State Bank of Pakistan showed on Wednesday.
The total government debt stocks reached Rs80.5 trillion as of March 2026, up from Rs73.7 trillion a year earlier. However, the pace of public debt accumulation in the nine months to March was slower than on a yearly basis, with the debt rising by Rs2.6 trillion, or 3.4 percent. In March alone, the debt increased by 0.8 per cent month-on-month (MoM).
The government’s domestic debt grew by 11.7 per cent, totalling Rs57.6 trillion in March. This figure represents a modest increase of 1.6 per cent from the previous month. During the period from July to March of FY26, the domestic debt rose by 5.67 per cent
“The mix is tilting uncomfortably towards the short end, with market treasury bills jumping 21.8 per cent YoY to Rs9.5 trillion, which keeps rollover risk elevated and front-end yields anchored higher,” said Saad Hanif, head of research at Ismail Iqbal Securities.
“On the long-term side, federal government bonds grew 9.4 per cent YoY to Rs43.4 trillion, with Pakistan Investment Bonds (PIBs) rising 6.1 per cent YoY to Rs35.7 trillion and GOP [Government of Pakistan] Ijara Sukuk up 18.5 per cent YoY to Rs7.1 trillion, reflecting the government’s continued push to lock in longer tenors where possible,” Hanif added.
External debt increased moderately by 3.6 per cent to Rs22.9 trillion in March, up from Rs22.2 trillion during the same period last year. However, foreign debt declined by 1.1 per cent compared to February and has dropped by 2.0 per cent in the nine months of FY26.
Hanif noted that long-term external debt contracted 12.8 per cent YoY as multilateral repayments rolled off faster than fresh inflows came in.
“With the total debt stock nearly doubling over the past five years and domestic instruments carrying almost the entire incremental load, the path forward hinges on nominal GDP growth holding up and the rupee staying stable, both of which ultimately rest on a fiscal discipline that these numbers suggest is still some distance away,” Hanif said.
The debt numbers come a day after Pakistan’s budget deficit declined to 0.7 per cent of GDP in the nine months of this fiscal year, compared to 2.6 per cent during the same period last year, in what the authorities claimed was an improvement in public finances amid curbs on spending and boosts in revenues.
In the third quarter of FY26, the country’s GDP rose to 3.99 per cent, an increase from 2.4 per cent in the same period last year. However, the outlook for the economy remains uncertain due to rising global crude prices stemming from the conflict in the Middle East. The government has provisionally estimated GDP growth at 3.7 per cent for FY26, with the overall size of the economy estimated to be Rs126.9 trillion or $455.2 billion based on the latest figures.
Awais Ashraf, director of research at AKD Securities Limited, said that the reduction in the pace of the government debt in July-March is primarily driven by government fiscal consolidation amid higher tax revenue growth and declining interest expenses.
“Interestingly, external debt has declined in both rupee and dollar terms. In PKR terms, it is down 2.0 per cent in 9MFY26, while in dollar terms it has decreased by $265 million,” Ashraf said.
“Despite the government’s focus on increasing long-term tenor debt, the growth in short-term instruments has been comparatively higher than in long-term debt,” he said. “Recently, short-term borrowing has gained traction after declining until December 2025, amid uncertainty stemming from the Middle East conflict.”
The country’s gross public debt increased to Rs83.3 trillion by the end of March, up from Rs76 trillion a year earlier. As of the end of March, Pakistan’s total debt and liabilities rose to Rs97.3 trillion compared to Rs89.8 trillion by the end of March 2025.
In dollar terms, Pakistan’s total outstanding external debt and liabilities increased to $137.5 billion as of March, up from $130 billion in the same period last year and $136 billion at the end of June. The external debt and liabilities reached $138 billion at the end of December 2025.
In the third quarter of FY26, the country’s external debt servicing payments totalled $3.8 billion, a decrease from $4.1 billion in the previous quarter. This amount included $1.15 billion paid in interest, which is down from $1.35 billion in the second quarter of this fiscal year. Additionally, $2.7 billion was gone for principal repayment compared to $2.72 billion in the October-December FY26 period.
