Pakistan's central government debt rose by 6.6 per cent in July from a year earlier, driven mainly by an increase in domestic borrowing to finance the government's fiscal needs, data from the State Bank of Pakistan showed. Total government debt stood at Rs83.383 trillion at the end of July, the first month of fiscal year 2026-27, up from Rs78.238 trillion a year earlier. However, the debt stock decreased 0.3 per cent month-on-month (MoM).
Domestic debt accounted for most of the increase, rising 7.8 per cent year-on-year (YoY) to Rs59.274 trillion in July from Rs54.988 trillion in the same period last year. However, domestic debt declined 0.3 per cent from the previous month. External debt rose 3.7 per cent from a year earlier to Rs24.109 trillion in July, compared with Rs23.25 trillion in July 2025.
On a monthly basis, external debt fell 0.4 percent. Awais Ashraf, director of research at AKD Securities, said the MoM decline in public debt is driven by controlled federal government spending and tax collection that exceeded the government's target during the month. However, the YoY increase shows the government's borrowing needs from banks remained high despite the central bank transferring Rs1.9 trillion in profits to the government in fiscal 2026, following a record Rs2.5 trillion transfer in fiscal 2025.
The public debt data come two days after Pakistan raised a record $3 billion through a dual-tranche Eurobond, comprising $1.75 billion at a yield of 7.5 per cent and $1.25 billion at 7.9 per cent, after investors offered $6 billion. Analysts described the smaller issuance as a prudent move given the relatively high cost of dollar borrowing and the country's rising external debt-servicing burden. The government last week made its largest-ever early repayment of domestic debt, retiring Rs1.2 trillion owed to the State Bank of Pakistan (SBP) ahead of schedule, bringing total domestic debt retired before maturity to more than Rs5.92 trillion.
The government said the repayments mark a shift towards active sovereign liability management, using improved fiscal space to reduce refinancing and rollover risks, ease future debt-servicing costs and strengthen the country's public debt profile.