Pakistan plans to meet gross financing needs of Rs. 28.65 trillion in the fiscal year ending June 2027, with the government seeking to reduce its reliance on short-term borrowing and shift toward longer-term fixed-rate bonds and Islamic Sukuk, according to its Annual Borrowing Plan.
The government estimates a federal fiscal deficit of Rs. 7.02 trillion for fiscal 2027, while debt maturities account for another Rs. 21.63 trillion, putting total gross financing needs at about 20% of projected gross domestic product of Rs. 143.67 trillion, the Finance Division’s Debt Management Office said in the plan released on Tuesday.
The borrowing strategy aligns with Pakistan’s Medium-Term Debt Management Strategy for fiscal years 2026-28, aiming to extend the maturity profile of government debt, limit refinancing and interest-rate risks and diversify the investor base.
The government expects to finance most of the fiscal deficit through domestic sources, with net domestic borrowing projected at Rs. 6.05 trillion. External financing is projected at Rs. 813 billion, while privatization proceeds are estimated at Rs. 161 billion. The plan calls for a reduction in net issuance of Market Treasury Bills, with net T-bill flows projected at negative Rs. 2.59 trillion. Maturing short-term debt is instead expected to be replaced by medium- and long-term instruments, including Pakistan Investment Bonds and Sukuk.
Net issuance of Pakistan Investment Bonds is projected at Rs. 4.58 trillion, making PIBs the largest source of incremental domestic borrowing. Fixed-rate PIBs are expected to account for more than half of new issuances, while floating-rate exposure will be restricted to the 10-year Sukuk variable-rate structure.
The government also plans to introduce a 20-year fixed-coupon bond after consultation with market participants. It will continue issuing two- and 15-year zero-coupon bonds to cater to institutional investors and diversify the range of available government securities.
The strategy intends to increase the average time to maturity of domestic debt while reducing the government’s exposure to fluctuations in short-term interest rates.
Sukuk issuance
Islamic financing will form another major component of the domestic borrowing program. The government expects Government Ijara Sukuk, Bai Muajjal and short-term Sukuk to generate net financing of about Rs. 3.79 trillion during fiscal 2027. Gross Sukuk issuance is targeted at around Rs. 6.6 trillion.
The plan follows the launch of a hybrid Sukuk in April 2026 and subsequent issuance of three- and six-month short-term Sukuk. The government also intends to accelerate development of a Central Asset Registry to facilitate issuance of Shariah-compliant securities.
The expansion of Sukuk is part of a broader effort to diversify the domestic debt portfolio and attract investors beyond traditional holders of conventional government securities.
The government has also continued liability management operations, including debt buybacks and switches. Since the program began in September 2024, transactions totaling Rs. 4.7 trillion have been conducted, according to the borrowing plan. Further buybacks and debt switches will depend on available fiscal space and market conditions.
Domestic debt maturities
Pakistan faces domestic debt principal repayments of about Rs. 17.1 trillion during fiscal 2027.
Market Treasury Bills account for the largest portion, with Rs. 11.1 trillion due for repayment, much of it concentrated in the first and second quarters. PIB maturities amount to about Rs. 3.1 trillion, including floating-rate bonds, while Government Ijara Sukuk maturities total about Rs. 1.9 trillion.
Another Rs. 900 billion of one-year discounted Sukuk is due during the year.
The concentration of short-term maturities explains the government’s emphasis on replacing T-bills with longer-duration securities. The borrowing plan says this approach is intended to improve the debt repayment profile and reduce refinancing risk.
Pakistan expects net external financing of Rs. 813 billion, equivalent to about $2.8 billion at the plan’s assumed exchange rate of Rs. 290 per dollar.
Multilateral partners are expected to provide the largest positive contribution, with net inflows projected at $1.58 billion. The government also plans to tap international capital markets, targeting more than $2 billion through Eurobonds and international Sukuk, subject to market conditions.
The borrowing plan says international bond issuance will partly be used to replace shorter-term external debt with longer-dated market-based financing, helping extend the maturity of external liabilities and reduce refinancing risks.
The detailed borrowing table, however, includes $2 billion of bond issuance based on the fiscal 2027 budget estimates and notes that a $3 billion Eurobond has already been issued. The government says domestic financing contributions will be adjusted accordingly.
Foreign commercial bank loans will also be refinanced, while the government may seek new facilities if financing terms and pricing are favorable.
Pakistan will continue promoting investment by non-residents through government securities, Naya Pakistan Certificates and Islamic Naya Pakistan Certificates.
Public debt
Pakistan’s total public debt stood at Rs. 86.7 trillion at the end of June 2026, consisting of Rs. 59.4 trillion in domestic debt and Rs. 27.3 trillion in external debt, according to the plan.
External principal repayments during fiscal 2027 are projected at $15.6 billion. Bilateral deposits account for $7 billion of the maturities and are expected to be rolled over. Multilateral lenders account for $5.3 billion and commercial lenders for $3.3 billion. There are no Eurobond maturities scheduled during the fiscal year.
The government says its debt-management measures have increased the average time to maturity of public debt from 2.7 years in June 2024 to 3.8 years in June 2026, with a target of 4.2 years by fiscal 2028.
Interest expenditure declined by 22% in fiscal 2026, according to the borrowing plan, while gross financing needs are projected at around 20% of GDP in fiscal 2027 compared with 21% in the previous fiscal year.
The government also plans to broaden participation in the domestic debt market by attracting retail investors.
It will continue promoting investment in government securities through digital channels, including InvestPak, while exploring additional mechanisms to make government securities more accessible to individuals. The Central Directorate of National Savings will also undergo restructuring, with plans to improve products, introduce market-driven pricing and expand digitalization.
The government said the Annual Borrowing Plan would be supplemented by quarterly auction calendars that provide guidance on planned domestic borrowing operations, instruments and indicative timing.
The Finance Division cautioned that the borrowing estimates remain subject to changes in domestic and international economic conditions, interest rates, exchange rates and debt-market dynamics.
The plan ultimately seeks to shift Pakistan’s borrowing structure away from short-term refinancing toward longer-term domestic securities, while increasing the role of Sukuk and international capital markets in financing the government’s fiscal requirements.