Finance Minister Muhammad Aurangzeb informed the Senate Standing Committee on Finance on Wednesday that Pakistan is shifting away from short-term borrowing. The government plans to move toward loans with maturities of five to ten years to ease pressure on government finances and reduce refinancing risks.
Aurangzeb stated that Pakistan previously faced the challenge of refinancing domestic debt every three months, which left government finances vulnerable to fluctuations in interest rates. By extending repayment periods, the government intends to manage its debt obligations more effectively.
Bosal told the committee that Pakistan’s total public debt reached Rs. 86.7 trillion in FY2026, compared with Rs. 24.9 trillion in FY2018. Despite the increase in the overall debt stock, the government has reduced its interest payment burden. Interest payments as a share of government revenue have fallen from 61 percent in FY2023-24 to 35 percent.
The government’s interest expenditure also declined from Rs. 8.9 trillion in FY2024-25 to Rs. 6.9 trillion in FY2025-26, saving nearly Rs. 2 trillion in annual payments. Bosal said the reduction was not solely due to lower interest rates, as improvements in the primary budget balance and debt management had also contributed.
Regarding specific debt figures, Bosal noted that domestic debt stood at Rs. 58.8 trillion in August 2026, down Rs. 684 billion from June, while external debt remained broadly stable at $98.2 billion. The average maturity of domestic debt has increased from 2.7 years in June 2024 to 3.8 years in June 2026. The government aims to extend it further to 4.2 years by FY2028.
Aurangzeb said Pakistan’s fiscal deficit had declined from around 12.5 percent to 2.5 percent, while the current account deficit stood at 0.1 percent of GDP in the last fiscal year. He added that foreign exchange reserves had reached $21.5 billion and were sufficient to cover around three months of imports.
For FY2027, Pakistan’s external debt servicing requirements stand at $21.5 billion, including $17.5 billion in principal repayments and $4 billion in interest. Aurangzeb stated that bilateral rollovers and commercial refinancing have reduced the estimated net payment requirement to around $11 billion. The finance minister said the government was seeking to reduce dependence on external borrowing and avoid returning to international lenders for emergency financial support.
