Central government debt rises 6.6% YoY to Rs83.4tr in July

Pakistan’s central government debt increased 6.6% year-on-year (YoY) to Rs83.383 trillion by the end of July 2026, mainly driven by higher domestic borrowing to meet the government’s financing requirements, according to data released by the State Bank of Pakistan (SBP).

 

The debt stock stood at Rs78.238 trillion in July 2025. However, on a month-on-month (MoM) basis, total government debt declined by 0.3% during July, marking the first month of fiscal year 2026-27.

 

Domestic debt accounted for the bulk of the increase, rising 7.8% YoY to Rs59.274 trillion from Rs54.988 trillion a year earlier. Despite the annual increase, domestic debt fell 0.3% from the previous month.

 

External debt increased 3.7% YoY to Rs24.109 trillion in July, compared with Rs23.25 trillion in the same month of 2025. On a monthly basis, external debt declined by 0.4%.

 

AKD Securities Director of Research Awais Ashraf attributed the monthly decline in public debt to controlled federal government spending and tax collections that exceeded the government’s target during July.

 

Despite the monthly reduction, the annual increase indicates that the government’s borrowing requirements from the banking sector remained elevated. This came despite the State Bank transferring Rs1.9 trillion in profits to the government during FY26, following a record Rs2.5 trillion transfer in FY25.

 

The latest debt figures come shortly after Pakistan secured $3 billion through a dual-tranche Eurobond issuance. The transaction comprised a $1.75 billion tranche carrying a 7.5% yield and a $1.25 billion tranche at 7.9%. The issue attracted bids worth around $6 billion.

 

Analysts viewed the relatively smaller issuance as a cautious approach given the high cost of international borrowing and the country’s growing external debt servicing obligations.

 

Meanwhile, the government recently completed its largest-ever early repayment of domestic debt by retiring Rs1.2 trillion owed to the SBP ahead of schedule.

 

With this repayment, total domestic debt retired before maturity has exceeded Rs5.92 trillion.

 

The government said the early repayments reflect a shift towards more active management of sovereign liabilities. It aims to use improved fiscal conditions to reduce refinancing and rollover risks, lower future debt-servicing costs and strengthen the overall public debt profile.