Pakistan's Public Debt Hit Rs86.7 Trillion in FY26 — Up 76% in Four Years

Pakistan's total public debt reached Rs86.7 trillion by the end of June 2026, up from Rs49.3 trillion four years earlier, according to the Ministry of Finance's newly released Annual Borrowing Plan for FY27. That is a 76% increase in four years — and a 340% increase over the past decade, from Rs19.7 trillion in June 2016.

What the debt is made of

Of the Rs86.7 trillion total, Rs59.4 trillion is domestic debt and the equivalent of Rs27.3 trillion is external debt. The foreign share of total public debt has been shrinking — down to around 31% in FY26 from 37-38% during FY19-23 — which the ministry frames as a reduction in the country's exposure to currency and external-financing risk.

The pace of new borrowing also slowed. Gross public debt grew by about Rs6.2 trillion, or 7.7%, during FY26 — the slowest annual growth rate in two decades, according to the ministry's own figures. The debt-to-GDP ratio has followed the same trend in reverse: it climbed as high as 86-88% during FY19-21, fell to around 75% by FY23, and now sits at roughly 68% in FY26. External debt-to-GDP specifically has fallen from about 28% to about 21% over the same stretch.

Why the ratio is improving even as the number keeps growing

A shrinking debt-to-GDP ratio alongside a rising debt stock isn't a contradiction — it means nominal GDP (inflation plus real growth) is growing faster than new borrowing is being added. That's consistent with what we've covered elsewhere this year: the FBR beating its first-quarter tax target feeds directly into the government's financing needs, and progress on Pakistan's IMF program review is tied to the same fiscal metrics the Annual Borrowing Plan tracks.

The ministry also points to a longer average maturity on domestic debt — up from 2.8 years to 3.8 years — as a sign of reduced refinancing risk. Longer maturities mean less of the debt stock has to be rolled over in any given year, which matters because rollover risk is exactly what makes a debt crisis self-reinforcing: a government forced to refinance a large share of its debt at once, at whatever interest rate the market demands that day, can see its interest bill spiral even if the underlying debt level hasn't changed.

What's still being borrowed this year

None of this means the government has stopped borrowing. The Annual Borrowing Plan projects a federal fiscal deficit of Rs7.02 trillion for FY27, and once domestic and external debt maturities are added in, total gross financing needs come to Rs28.65 trillion — close to 20% of GDP. Net new borrowing is planned at Rs6.046 trillion domestic and Rs813 billion external.

The ministry says it intends to shift the composition of that new domestic borrowing away from short-term treasury bills and toward longer-dated Pakistan Investment Bonds, with planned net PIB issuance of Rs4.58 trillion — the same maturity-extension strategy that produced the longer average tenor cited above.

Why this matters beyond the balance sheet

Debt sustainability isn't an abstract fiscal metric in Pakistan — it shapes how much of every tax rupee collected goes to interest payments rather than services, and it's one of the core metrics the IMF tracks in each program review. A slower growth rate and a falling debt-to-GDP ratio give the government more room in upcoming budget talks than it had two or three years ago, even as the absolute number keeps climbing. Whether that room translates into lower borrowing costs for the government — and by extension for the benchmark rates that price loans across the economy — will depend on whether the trend holds through FY27, not just on this one year's numbers.

Build Better Pakistan's Economy Desk tracks Pakistan's public finances and will cover the policy-level detail of the FY27 Annual Borrowing Plan as it is debated.