Government to Fund 75% of Fiscal Deficit Through Domestic Borrowing of Rs. 6,046 Billion
Pakistan plans to raise Rs. 6,046 billion through net domestic borrowing to cover most of its Rs. 7,020 billion fiscal deficit, shifting away from short-term debt toward longer-tenor instruments.
The government plans to finance roughly 75 percent of the federal fiscal deficit through domestic borrowing, with net domestic borrowing projected at Rs. 6,046 billion against a federal fiscal deficit of Rs. 7,020 billion, according to the government's borrowing strategy.
A central element of the plan is a deliberate move away from short-term debt toward instruments with longer tenors, aimed at managing debt servicing and refinancing risks. Net retirement of short-term debt, particularly Treasury Bills, is planned at Rs. 2,592 billion, with maturing liabilities expected to be rolled over into longer-dated instruments.
The strategy also envisages a significant increase in the issuance of Pakistan Investment Bonds, with net issuance projected at around Rs. 4,580 billion. Fixed-rate bonds are expected to account for more than half of new issuances, while floating-rate debt will be capped, with the 10-year Sukuk Variable Rental Rate instrument expected to remain the only floating-rate option.
Under its Sukuk expansion strategy, the government has set a gross issuance target of approximately Rs. 6,600 billion, including the introduction of new hybrid Sukuk instruments as well as three-month and six-month Sukuk. The borrowing plan also provides for continued liability management operations, such as debt buybacks and switches, to lower refinancing risks.
On the external side, the government has projected a modest net inflow of $2.8 billion, equivalent to Rs. 813 billion, for deficit financing. Multilateral development partners are expected to remain the primary source of external financing, with a projected net inflow of $1.58 billion, while external repayments are projected at Rs. 17 trillion.
The government also plans to return to international capital markets by issuing more than $2 billion in Eurobonds and international Sukuk, noting that $3 billion worth of Eurobonds has already been issued. It intends to replace shorter external debt with longer-dated financing to improve the country's debt maturity profile, and will explore Panda Bonds and initiatives to channel foreign portfolio investment into domestic bonds. In addition, National Savings schemes are set to be restructured through market-based pricing and digitalization, with retail investor access expanded through InvestPak and digital wallets.
