Pakistan’s federal government significantly increased domestic debt repayments during July–October FY27, compared with just Rs45.61 billion retired in the same period last year.

KARACHI: The federal government has repaid approximately Rs1.85 trillion to commercial banks against maturing domestic debt during the first four months (July–October) of fiscal year 2026-27, reflecting a significant increase in debt retirement.

According to data released by the State Bank of Pakistan (SBP) on Thursday, the government retired Rs1.85 trillion during the period, compared with just Rs45.61 billion in the corresponding period of the previous fiscal year.

Market experts attributed the substantial repayment to improved fiscal management and economic consolidation, supported by lower interest rates.

The federal government raises domestic financing from commercial banks through the auction of Market Treasury Bills (MTBs) and Pakistan Investment Bonds (PIBs). These instruments help finance budgetary requirements and manage government borrowing.

Experts said the prevailing lower interest rates had helped the government reduce its domestic borrowing costs and retire a substantial amount of maturing debt owed to commercial banks.

Meanwhile, the government also repaid Rs755.63 billion to the State Bank of Pakistan during July–October FY27.

This compared with Rs906 billion retired to the central bank during the corresponding four-month period of the previous fiscal year.

The latest figures indicate a substantial shift in the government’s domestic debt repayment pattern, particularly in its outstanding obligations to commercial banks.

The increased retirement of bank debt could help ease the government’s reliance on domestic borrowing, although its overall fiscal position will also depend on future financing requirements and debt maturities.