ISLAMABAD: The federal government has projected gross financing needs of Rs28.647 trillion for fiscal year 2026-27, equivalent to around 20 percent of GDP, while planning to finance the bulk of its Rs7.02 trillion fiscal deficit through domestic borrowing.
According to the Annual Borrowing Plan (ABP) for FY2027, prepared by the Debt Management Office, the PKR/USD exchange rate for FY2027 has been assumed at Rs290 per dollar.
Successful implementation will ultimately depend on how the macroeconomic and geopolitical environment unfolds during the year, as well as maintaining fiscal discipline to achieve the projected outcomes, it added.
READ MORE: Pakistan’s FY27 external debt servicing projected at $21.5bn: SBP governor
The government will raise Rs6.046 trillion through net domestic borrowing, compared with Rs813 billion in net external financing, while Rs161 billion is expected from privatisation proceeds.
The government has planned a major shift in its domestic borrowing strategy, with reduced reliance on short-term Treasury Bills and greater issuance of medium- and long-term instruments to contain refinancing risks and extend the maturity profile of public debt.
The plan envisages net issuance of Rs4.58 trillion in Pakistan Investment Bonds (PIBs), while fixed-rate PIBs are targeted to account for more than 50 percent of new issuances. The government has also planned around Rs3.785 trillion in Government Ijara Sukuk, Bai Muajjal and short-term Sukuk.
The government has further planned gross Sukuk issuance of around Rs6.6 trillion during FY2026-27, following the introduction of Hybrid Sukuk and short-term Sukuk with three- and six-month tenors.
The borrowing plan also proposes introducing a 20-year fixed-coupon bond after consultation with stakeholders, while the government intends to replace the 10-year zero-coupon floating-rate instrument with a 10-year fixed-rate instrument.
The strategy comes as the government faces Rs21.627 trillion in debt maturities during FY27, including Rs17.096 trillion in domestic maturities and Rs4.531 trillion in external repayments. Together with the fiscal deficit, these requirements take gross financing needs to Rs28.647 trillion.
Domestic debt maturities are estimated at around Rs17 trillion, including Rs11.1 trillion in Treasury Bills, Rs3.1 trillion in PIBs and Rs1.9 trillion in Government Ijara Sukuk. A major portion of Treasury Bill maturities is concentrated in the first two quarters of the fiscal year.
On the external side, the government has projected net external financing of USD 2.804 billion, with multilateral sources expected to provide a net inflow of USD 1.58 billion. It also plans to raise around USD 2 billion through international bonds, subject to favourable market conditions. Total external inflows are estimated at USD 13.378 billion against outflows of USD 10.574 billion.
The external financing plan includes refinancing existing foreign commercial bank loans and exploring new financing options where more favourable terms and pricing are available.
The government’s external debt principal maturities are estimated at USD 15.6 billion, including USD 7 billion in bilateral deposits, which are expected to be rolled over. Multilateral maturities stand at USD 5.3 billion and commercial lender maturities at USD 3.3 billion, while there are no Eurobond maturities during FY27.
The borrowing plan comes against a public debt stock of Rs 86.7 trillion at end-June 2026, comprising Rs 59.4 trillion domestic debt and Rs27.3 trillion external debt.
The Debt Management Office said the government had increased the average time to maturity of its debt portfolio from 2.7 years in June 2024 to 3.8 years in June 2026, with a target of 4.2 years by FY2028. It also said interest expenditure declined by 22 percent in FY2026.
Under the FY27 plan, Market Treasury Bills are projected to record negative net issuance of Rs2.592 trillion, while PIBs will post net issuance of Rs4.58 trillion and Sukuk-related instruments Rs3.785 trillion.
The government will also continue liability management operations, including debt buybacks and switches. Since September 2024, such transactions amounting to Rs4.7 trillion have been conducted, according to the plan.
The plan also envisages restructuring of the Central Directorate of National Savings through improved products, market-driven pricing and digitalisation, alongside further efforts to expand retail participation in government securities.
Copyright Business Recorder, 2026
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