Pakistan Switches to New Debt Formula

Pakistan is shifting away from short-term borrowing towards loans with maturities of five to ten years to reduce refinancing risks and ease pressure on administration finances, Finance Minister Muhammad Aurangzeb informed the Senate Standing Committee on Finance on Wednesday.

Key points

• The average maturity of domestic debt has rose from 2.7 years in June 2024 to 3.8 years in June 2026.
• Pakistan's external debt servicing requirements for FY2027 stand at $21.5 billion, including $17.5 billion in principal repayments and $4 billion in interest.
• While external debt remained broadly stable at $98.2 billion, 684 billion from June.
• Finance Secretary Imdadullah Bosal informed the committee that Pakistan's total public debt had reached Rs.
• He continued that foreign exchange reserves had reached $21.5 billion and were sufficient to cover around three months of imports.

Aurangzeb remarked Pakistan had previously faced the challenge of refinancing domestic debt every three months, making administration finances vulnerable to changes in interest rates. Extending repayment periods would support the administration manage its debt obligations more effectively. ECC Approves Rs. 275 Billion for Major Water Sector Projects.

Finance Secretary Imdadullah Bosal informed the committee that Pakistan's total public debt had reached Rs. 86.7 trillion in FY2026, compared with Rs. 24.9 trillion in FY2018.

Despite the growth in the overall debt stock, the administration has reduced its interest payment burden. Interest payments as a share of administration revenue have fallen from 61 percent in FY2023-24 to 35 percent.

Notably, the government's interest expenditure additionally declined from Rs. 8.9 trillion in FY2024-25 to Rs. 6.9 trillion in FY2025-26, saving almost Rs. 2 trillion in annual payments.

As improvements in the primary budget balance and debt management had additionally contributed, bosal remarked the reduction was not solely due to lower interest rates.

Domestic debt stood at Rs. 58.8 trillion in August 2026, down Rs. While external debt remained broadly stable at $98.2 billion, 684 billion from June.

In practice, the average maturity of domestic debt has rose from 2.7 years in June 2024 to 3.8 years in June 2026. The administration seeks to extend it further to 4.2 years by FY2028.

While the current account deficit stood at 0.1 percent of GDP in the last fiscal year, aurangzeb remarked Pakistan's fiscal deficit had declined from around 12.5 percent to 2.5 percent.

Pakistan's external debt servicing requirements for FY2027 stand at $21.5 billion, including $17.5 billion in principal repayments and $4 billion in interest. Bilateral rollovers and commercial refinancing have reduced the estimated net payment requirement to around $11 billion. Pakistan Gets Another $3 Billion Loan Rollover from Saudi Arabia.

In practice, the finance minister remarked the administration was seeking to reduce dependence on external borrowing and avoid returning to international lenders for emergency financial backing. Stay Connected with ProPakistani.

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Taken together, the developments around pakistan Switches to New Debt Formula point to a situation that is still moving, and the coming days should bring more clarity.