Pakistan’s total public debt increased 7.7% to Rs86.72 trillion by the end of June 2026, compared with 13% growth a year earlier, according to the Ministry of Finance’s Annual Debt Review FY2026. Despite the increase in debt, the public debt-to-GDP ratio declined to 68.3% from 70.6%.
The slower pace of debt accumulation was supported by fiscal consolidation, a federal primary surplus of Rs2.185 trillion and lower interest costs. Interest expenditure fell 22% to Rs6.948 trillion in FY26 from Rs8.887 trillion a year earlier, while the federal fiscal deficit narrowed to Rs4.763 trillion from Rs7.089 trillion.
Domestic debt rose 9% to Rs59.441 trillion, while external debt increased 6.8% year-on-year to $98.075 billion. In dollar terms, Pakistan’s total public debt stood at around $312 billion.
The government financed 75% of the federal fiscal deficit through domestic borrowing and 25% through external sources. Net domestic financing stood at Rs3.586 trillion, while net external financing amounted to Rs1.177 trillion.
Within domestic borrowing, Market Treasury Bills increased 25% to Rs10.928 trillion, while Sukuk and Bai-Muajjal financing rose 35% to Rs8.559 trillion. Commercial banks remained the largest holders of government securities, increasing their share of domestic debt to 70% from 64%.
Pakistan also returned to international capital markets during FY26 after a four-year gap, issuing a $750 million Eurobond in April and a CNY1.75 billion Panda bond in May.
The report noted that the government retired Rs1.926 trillion in State Bank of Pakistan debt and conducted market debt buybacks worth Rs996 billion during the fiscal year. Government guarantees stood at Rs4.283 trillion at the end of June 2026, with the power sector accounting for around 56% of outstanding guarantees.
