Key Takeaways
- Total public debt has surged 76% to Rs86.7tr in four years.
- Gross financing needs for the current fiscal year are projected at Rs28.65tr.
- The government plans to borrow Rs6.86tr to finance the budget deficit.
The government of Pakistan has announced plans to borrow an additional Rs6.86tr to finance the budget deficit, as total public debt has surged 76% to Rs86.7tr in the past four years, according to the Ministry of Finance.
The total public debt comprises Rs59.4tr in domestic debt and Rs27.3tr in external debt, with net additional debt this year projected to be Rs6.046tr in domestic borrowing and Rs813bn in external borrowing.
The gross financing needs (GFNs) for the current fiscal year are projected at Rs28.647tr, approximately 20% of GDP for FY27, the ministry said in its Annual Borrowing Plan 2027.
To reduce reliance on short-term treasury bills, the government plans to replace T-bill maturities with medium- to longer-term tenor instruments, with higher net issuances of Rs4.58tr of Pakistan Investment Bonds (PIBs), with fixed-rate PIBs targeted to exceed 50% of new issuances.
Floating-rate exposure will be limited to the 10-year sukuk on a variable rate of return only, and the government plans to issue Ijara sukuk/Bai Muajjal to the extent of Rs3.785tr, supported by new hybrid sukuk and short-term sukuk (3-6 months) structures.
Gross annual sukuk issuances are targeted at about Rs6.6tr, with the government aiming for over $2bn in Eurobonds or International sukuk, subject to market conditions. The government has already raised $3bn in Eurobonds last month.
To support market access, the government will maintain active engagement with sovereign credit rating agencies and continue to use 2- and 15-year zero-coupon bonds and introduce new long-dated instruments after consulting all stakeholders.
Non-resident investment via Naya Pakistan Certificates and government securities will be facilitated with a Rs1.122tr target, and the government will continue to use 2- and 15-year zero-coupon bonds and introduce new long-dated instruments after consulting all stakeholders.
Overall, for domestic debt, primary emphasis will be on increasing the share of fixed-rate instruments and diversifying the debt portfolio by developing Shariah-compliant sukuk markets, retail instruments, and long-term bonds for institutional investors.
