KARACHI: Pakistan’s central government debt increased over Rs1.4 trillion during the first seven months of the current fiscal year (FY26), largely driven by a rise in long-term domestic borrowing.
According to data released by the State Bank of Pakistan (SBP) on Thursday, the country’s total debt stocks, including both domestic and external debt liabilities, reached Rs79.322 trillion by the end of January 2026.
This reflects an increase of Rs1.434 trillion, or 1.84 percent, compared with Rs77.888 trillion recorded in June 2025.
The sharp rise in central government debt was mainly driven by increased domestic borrowing to finance the fiscal deficit. Although revenue collection has improved during the current fiscal year, it remains insufficient to fully meet government expenditures.
READ MORE: Govt debt rises Rs641bn in first half of FY26: SBP
On the domestic front, debt stocks increased by 2.7 percent, or Rs1.506 trillion, during July-January of FY26. Domestic debt reached Rs55.978 trillion by the end of January 2026, compared with Rs54.472 trillion in June 2025, as the federal government accelerated fresh borrowing from local sources to meet its financing requirements.
In contrast, external debt recorded a slight decline. The country’s external debt stocks fell by Rs73 billion to Rs23.344 trillion by the end of January 2026, down from Rs23.417 trillion in June 2025.
The Federal Board of Revenue (FBR) tax collection grew by 9.5 percent in the first half of FY26, significantly lower than the 26 percent growth recorded in the same period last year. The slower pace of revenue growth also fell short of the target, resulting in a shortfall of Rs329 billion.
The gap suggests that a substantial acceleration in tax collection will be required in the second half of FY26 to meet the annual FBR revenue target. Otherwise, the federal government may have to rely on additional borrowing to finance the fiscal deficit.
Despite the revenue shortfall, estimates from the financing side indicate some improvement in the fiscal balance during the first half of FY26, reflecting relatively contained government expenditures.
With cut in the key policy rate, interest payments remained significantly lower than the same period last year, which is likely to help achieve the full-year fiscal deficit target. However, achieving the annual primary surplus target seems challenging.
Copyright Business Recorder, 2026
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