Pakistan’s external debt rises to $91.8 billion, domestic debt hits Rs54.5 trillion

Pakistan’s external debt increased by 6% year-on-year to $91.8 billion by the end of June 2025, reflecting a rise of $5 billion, according to the Debt Policy Statement January 2026 tabled in the National Assembly.

During the first quarter of FY2026, external debt declined slightly by 0.4%, or $0.35 billion, to $91.4 billion.

The statement attributed the increase primarily to borrowing from multilateral development partners, including the IMF, which rose by 8.7% or nearly $4 billion. Additional borrowing of $1.6 billion from commercial banks also contributed, including a $1 billion loan backed by an Asian Development Bank guarantee.

Multilateral lenders accounted for 56% of total external debt as of September 2025, followed by bilateral partners at 26%. The remaining share included 7% from international bond issuances, 8% from commercial banks and 2% from other sources, including Naya Pakistan Certificates.

The share of external debt in total public debt declined from 34% in June 2024 to 32% in June 2025, remaining within the 40% ceiling set under the Medium Term Debt Management Strategy.

Domestic debt rose by Rs7,312 billion, or 16% year-on-year, to Rs54,472 billion by June 2025, although the growth rate was lower than 22% recorded in the previous year.

In the first quarter of FY2026, domestic debt declined by 2% to Rs53,424 billion following the government’s decision to retire Rs1 trillion in debt owed to the State Bank of Pakistan.

Permanent debt, comprising long-term instruments such as Pakistan Investment Bonds and Government Ijarah Sukuks, increased by 26% to Rs41,777 billion by June 2025, driven by higher issuances of medium- to long-term instruments.

Short-term floating debt, primarily in the form of Market Treasury Bills, declined by 14.5% to Rs8,756 billion during FY2025 and further fell by 3.4% to Rs8,400 billion by September 2025, in line with efforts to reduce refinancing risks.

Unfunded debt, raised through National Savings Schemes, increased by 8.7% to Rs3,021 billion by June 2025 and accounted for around 6% of total domestic debt.

The Debt Policy Statement noted that while debt levels remain within strategic limits, they remain sensitive to exchange rate movements and financing conditions.