Pakistan Shifts to Longer-Term Debt to Cut Refinancing Risk, Finance Minister Tells Senate
Finance Minister Muhammad Aurangzeb says Pakistan is moving from three-month rollovers toward five- to ten-year debt, while total public debt reaches Rs. 86.7 trillion and interest costs fall by nearly Rs. 2 trillion.
Pakistan is restructuring the way it borrows, moving away from short-term instruments toward loans with maturities of five to ten years in a bid to reduce refinancing risk and steady government finances, Finance Minister Muhammad Aurangzeb told the Senate Standing Committee on Finance on Wednesday.
Aurangzeb said the government had previously been forced to refinance domestic debt every three months, which left public finances exposed to sudden shifts in interest rates. Lengthening repayment periods, he argued, would give the government more room to manage its obligations in an orderly way rather than repeatedly rolling over debt at short notice.
Finance Secretary Imdadullah Bosal told the committee that total public debt stood at Rs. 86.7 trillion in FY2026, up sharply from Rs. 24.9 trillion in FY2018. Even so, he said the burden of servicing that debt has eased: interest payments as a share of government revenue have fallen from 61 percent in FY2023-24 to 35 percent, while annual interest expenditure dropped from Rs. 8.9 trillion in FY2024-25 to Rs. 6.9 trillion in FY2025-26, a saving of nearly Rs. 2 trillion.
Bosal attributed the improvement not only to lower interest rates but also to a stronger primary budget balance and better debt management. Domestic debt stood at Rs. 58.8 trillion in August 2026, down Rs. 684 billion from June, while external debt remained broadly flat at $98.2 billion. The average maturity of domestic debt has risen from 2.7 years in June 2024 to 3.8 years in June 2026, with the government targeting 4.2 years by FY2028.
On the wider fiscal picture, Aurangzeb said the deficit had narrowed from around 12.5 percent to 2.5 percent, and the current account deficit stood at 0.1 percent of GDP in the last fiscal year. Foreign exchange reserves have reached $21.5 billion, enough to cover roughly three months of imports, he added.
External debt servicing for FY2027 is projected at $21.5 billion, comprising $17.5 billion in principal repayments and $4 billion in interest. Bilateral rollovers and commercial refinancing have brought the estimated net payment requirement down to about $11 billion. The finance minister said the government aims to reduce its reliance on external borrowing and avoid returning to international lenders for emergency support.
