Pakistan is preparing to increase borrowing during fiscal year 2026-27 as the government seeks to finance its budget deficit amid a sharp rise in public debt over recent years.

Under the Ministry of Finance's Annual Borrowing Plan 2027, Islamabad intends to borrow approximately PKR 6.86 trillion during the current fiscal year to support government spending and cover the fiscal gap.

The borrowing program comes as Pakistan's total public debt has expanded significantly. According to official figures, public debt reached PKR 86.7 trillion at the end of June 2026, compared with PKR 49.3 trillion in June 2022.

The debt stock comprises both domestic and external liabilities, underscoring the growing burden on the country's finances despite ongoing fiscal reforms and international support programmes.

To manage its debt profile more effectively, the government plans to reduce its dependence on short-term Treasury Bills and place greater emphasis on medium- and long-term funding instruments.

Authorities are expected to increase the issuance of Pakistan Investment Bonds and other longer-duration securities in an effort to lower refinancing risks and extend debt maturities.

The Finance Ministry is also seeking to attract a broader range of investors. Planned measures include promoting zero-coupon bonds, National Savings Schemes and other government-backed securities to both institutional and retail investors.

For external financing, Pakistan intends to continue relying on multilateral lenders while simultaneously seeking greater access to international capital markets.

The government is targeting the mobilisation of more than $2 billion through Eurobond or international sukuk issuances during the fiscal year, subject to market conditions.

Islamabad also plans to refinance selected foreign commercial bank loans and encourage overseas Pakistanis to invest through instruments such as Naya Pakistan Certificates.

Officials intend to maintain engagement with international credit-rating agencies while pursuing debt-management measures including debt buybacks and debt exchanges.

Additional details from the government's borrowing framework indicate a broader strategy aimed at improving the maturity structure of public debt and reducing dependence on short-term financing, which has historically exposed the country to refinancing pressures.

Pakistan's rapidly rising debt burden reflects the persistent fiscal challenges facing the government. While the revised borrowing strategy is designed to strengthen debt management and diversify funding sources, continued reliance on domestic and external financing highlights the pressure on Islamabad to balance fiscal sustainability with expenditure requirements.

The latest plan demonstrates that debt management will remain one of the most significant economic challenges confronting Pakistan as it seeks to maintain financial stability, secure external funding and support economic growth in the years ahead.

ANI