Annual Borrowing Plan projects Rs7.02 trillion fiscal deficit and outlines greater reliance on long-term bonds, Sukuk and market-based external financing.
ISLAMABAD: Pakistan requires gross financing of around Rs28.65 trillion during fiscal year 2026-27, equivalent to approximately 20 per cent of the country’s gross domestic product (GDP), according to the Finance Ministry’s Annual Borrowing Plan (ABP) for FY2027.
The ABP outlines the government’s borrowing strategy to meet financing requirements during the current fiscal year and is aligned with the broader objectives of the Medium-Term Debt Management Strategy (MTDS) FY2026-28.
According to the plan, the federal fiscal deficit for FY27 is projected at Rs7.02 trillion. After accounting for domestic and external debt maturities, the government’s total gross financing needs are estimated at Rs28.647 trillion, equivalent to around 20 per cent of GDP.
To finance the federal fiscal deficit, the government has projected net domestic borrowing of Rs6.046 trillion.
Domestic borrowing strategy
The domestic financing strategy envisages reducing reliance on short-term Treasury Bills (T-Bills) on a net issuance basis. Maturing T-Bills are planned to be replaced with medium- and long-term instruments to improve the maturity profile of government debt.
The government plans to increase net issuance of Pakistan Investment Bonds (PIBs) by Rs4.58 trillion, with fixed-rate PIBs targeted to account for more than 50 per cent of new issuances. Floating-rate exposure will be largely limited to the 10-year Sukuk Variable Rental Rate (VRR).
The borrowing plan also assigns a significant role to government Ijara Sukuk and Bai Muajjal. These instruments are expected to contribute Rs3.785 trillion, supported by new hybrid Sukuk and short-term Sukuk structures with maturities of three to six months.
Gross annual Sukuk issuance is targeted at around Rs6.6 trillion, reflecting the government’s plan to expand Shariah-compliant financing and diversify the domestic debt portfolio.
The government will continue using two- and 15-year zero-coupon bonds and may introduce new long-dated instruments after consultation with relevant stakeholders. Liability management operations, including debt buybacks and exchanges, will continue subject to available fiscal space and suitable market conditions.
The plan further states that restructuring of the Central Directorate of National Savings (CDNS) and National Savings Schemes (NSS) is under way. The restructuring aims to improve products, introduce market-driven pricing and promote digitalisation to deepen participation by retail investors.
External financing strategy
Pakistan’s net external financing requirement is projected at Rs813 billion, equivalent to approximately $2.804 billion.
Multilateral development partners are expected to remain the principal source of external financing, with net inflows projected at $1.58 billion during FY27.
The government also plans to increase its presence in international capital markets, targeting more than $2 billion through Eurobonds and international Sukuk, subject to favourable market conditions.
According to the borrowing plan, international capital market issuances would also help replace short-term external debt with longer-maturity, market-based financing.
Foreign commercial bank financing will be refinanced alongside new facilities, subject to market conditions, to meet external financing requirements.
The government will continue facilitating non-resident investment through Naya Pakistan Certificates (NPCs/INPCs) and government securities, while maintaining active engagement with sovereign credit rating agencies to support access to international capital markets.
Focus on longer-term debt
Overall, the government’s domestic debt strategy places emphasis on increasing the share of fixed-rate instruments, extending maturities and diversifying the debt portfolio through Sukuk, retail investment products and long-term bonds for institutional investors.
For external borrowing, the priority will be on increasing international capital market issuances, subject to the prevailing international macroeconomic environment and market conditions.
The borrowing plan therefore sets out a financing mix centred on longer-term domestic instruments, greater use of Shariah-compliant securities and increased access to international capital markets to meet Pakistan’s FY27 financing requirements.