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 government finances, Finance Minister Muhammad Aurangzeb told the Senate Standing Committee on Finance on Wednesday.
Aurangzeb said Pakistan had previously faced the challenge of refinancing domestic debt every three months, making government finances vulnerable to changes in interest rates. Extending repayment periods would help the government manage its debt obligations more effectively.
Finance Secretary Imdadullah Bosal told 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 increase in the overall debt stock, the government has reduced its interest payment burden. Interest payments as a share of government revenue have fallen from 61 percent in FY2023-24 to 35 percent.
The government’s interest expenditure also declined from Rs. 8.9 trillion in FY2024-25 to Rs. 6.9 trillion in FY2025-26, saving nearly Rs. 2 trillion in annual payments.
Bosal said the reduction was not solely due to lower interest rates, as improvements in the primary budget balance and debt management had also contributed.
Domestic debt stood at Rs. 58.8 trillion in August 2026, down Rs. 684 billion from June, while external debt remained broadly stable at $98.2 billion.
The average maturity of domestic debt has increased from 2.7 years in June 2024 to 3.8 years in June 2026. The government aims to extend it further to 4.2 years by FY2028.
Aurangzeb said Pakistan’s fiscal deficit had declined from around 12.5 percent to 2.5 percent, while the current account deficit stood at 0.1 percent of GDP in the last fiscal year.
He added that foreign exchange reserves had reached $21.5 billion and were sufficient to cover around three months of imports.
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.
The finance minister said the government was seeking to reduce dependence on external borrowing and avoid returning to international lenders for emergency financial support.
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