Pakistan debt management and financing efforts

Pakistan is implementing a strategy to manage its external debt by refinancing short-term obligations into longer-term commitments. Finance Minister Muhammad Aurangzeb has stated the government aims to maintain the total external debt stock near $100 billion while improving repayment schedules to reduce rollover risks. To diversify financing, the government is expanding its use of Islamic Sukuk and new rupee-denominated bonds settled in US dollars.

For the 2026-27 fiscal year, Pakistan has projected gross financing needs of Rs. 28.647 trillion, assuming an exchange rate of Rs. 290 per US dollar. To manage a projected fiscal deficit of Rs. 7.02 trillion, the strategy focuses on increasing medium- and long-term borrowing through instruments like Pakistan Investment Bonds (PIBs) to reduce reliance on short-term Treasury Bills.

In recent developments, the government’s Debt Management Office rejected a $490 million commercial loan from the International Islamic Trade Finance Corporation (ITFC) because the estimated 8 percent interest rate exceeded the government’s 6 percent target.

State Bank of Pakistan Governor Jameel Ahmed reported that the country has paid approximately $16 billion in interest on foreign loans over the last four years, averaging $4 billion annually. While total external debt stands at roughly $107 billion, the governor noted that multilateral and bilateral lenders now account for about 80 percent of the total. The central bank aims to reduce annual foreign loan interest payments to below $3 billion next year and intends to increase foreign exchange reserves to $25 billion by June 2027.