As of end-June 2025: External debt up 6pc to USD 91.8bn YoY

ISLAMABAD: External debt increased by 6 percent year-on-year (YoY), reaching USD 91.8 billion as of end-June 2025, reflecting a rise of USD5 billion. However, during the first quarter of fiscal year 2026, it declined slightly by 0.4 percent (USD0.35 billion) to USD91.4 billion.

A total domestic debt increased by Rs 7,312 billion, reaching Rs 54,472 billion as of June 2025, showing an increase of 16 percent on a YoY basis, which was still lower than 22 percent during the same period of last fiscal year (2024).

The domestic debt declined by 2 percent during the first quarter of the current fiscal year 2026 to stand at Rs 53,424 billion due to the government’s proactive decisions to retire from the State Bank of Pakistan, amounting to Rs 1 trillion.

According to the Debt Policy Statement January-2026, which was tabled in the National Assembly on Monday, a major increase in the external debt came from multilateral development partners (including the IMF), which increased by 8.7 percent, almost USD 4 billion.

READ ALSO: Finance ministry rebuts ‘misleading’ claims on Pakistan’s external debt

Borrowing from commercial banks by USD 1.6 billion, largely due to a USD 1 billion loan secured against an ADB Policy-Based guarantee.

The Debt Policy Statement further described that more than half of Pakistan’s external debt (56 percent as of September 25) is from multilateral development financial institutions, including the IMF.

The second major source of external debt is from bilateral partners, including Paris Club and bilateral countries’ deposits, which have approximately a 26 percent share of external debt.

The remaining external debt consists of 7 percent from international Bond issuances, 8 percent from commercial banks, and 2 percent from other sources, which also include Naya Pakistan Certificates. Overall, the share of external debt in total public debt decreased from 34 percent (June-24) to32 percent (June-25), which is within the maximum limit of 40 percent as envisaged in the Medium Term Debt Management Strategy (MTDS) but remains sensitive to exchange rate movement.

According to the Debt Policy Statement - January 2026, the domestic debt declined by 2 percent during the first quarter of the current fiscal year 2026, amounting toRs 53,424 billion, due to the government’s proactive decision to retire debt from the State Bank of Pakistan (SBP) amounting to Rs 1 trillion.

The domestic debt has three major components: permanent debt, floating rate debt, and unfunded debt. Permanent debt is long-term debt having a maturity of greater than 1-year, fixed and floating, mostly in the form of Pakistan Investment Bonds (PIBs) and Government Ijarah Sukuks (GIS). Asof June 25, permanent debt increased by 26 percent (YoY) to stand at Rs41,777 billion. This was mostly driven by significant issuances in the medium to long-term PIB and Sukuk issuances, which increased by 33 percent. The number as of the end of September 25 declined by 2.4 percent, mainly due to the settlement of PIB amounting to Rs1 trillion from SBP. Floating-rate debt comprises short-term debt having maturities of less than 1 year. They mainly include Market Treasury Bills (MTBS) of 3-month, 6-month, and 12-month tenors. During FY-25, outstanding MTBS declined by 14.5 percent to Rs 8,756 billion. This is in line with the government’s strategy to reduce short-term debt to improve the refinancing risk profile. This trend has continued within the first quarter of fiscal year 26, where MTBs declined by 3.4 percent to stand at Rs 8,400 billion as of the end of September 2025.

The statement further said that unfunded debt is debt raised through non-banking sources, primarily through various instruments available under the National Savings Schemes, administered by the Central Directorate of National Savings. The amount invested under various instruments of National Savings Schemes (NSS) increased 8.7 percent YoY, to Rs 3,021 billion as of end Jun-2025. Overall, unfunded debt contributed almost 6 percent of total domestic debt.

Copyright Business Recorder, 2026