Pakistan’s Federal Debt Reaches Rs 78.5 Trillion: Surging Domestic Borrowing Offsets External Gains. -

Pakistan’s economic landscape faces a dual reality as the federal government’s total debt reached a staggering Rs 78.529 trillion as of December 2025. While the State Bank of Pakistan (SBP) reports a successful reduction in external liabilities, a sharp spike in domestic borrowing has pushed the overall debt stock higher by Rs 641 billion in the first half of FY26.

Key Breakdown of the Debt Situation

The latest data from the SBP highlights the shifting dynamics of Pakistan’s borrowing strategy:

Surge in Domestic Debt: Local borrowing remains the primary driver of the debt increase. Domestic debt rose by Rs 891 billion (1.6%), climbing from Rs 54.472 trillion in June 2025 to Rs 55.363 trillion by December 2025.
Decline in External Liabilities: In a rare positive turn, external debt fell by Rs 251 billion, dropping from Rs 23.417 trillion to Rs 23.166 trillion. This reflects the government’s effort to reduce reliance on foreign-currency-denominated loans.
Aggressive Repayment Schedule: SBP Governor Jameel Ahmad confirmed that Pakistan has successfully repaid approximately USD 6 billion in external obligations since the start of the current fiscal year (FY26).
Year-on-Year Growth: The total debt has grown by 9.6% compared to December 2024, marking a net increase of Rs 6.882 trillion in just one year.

Fiscal Strategy: Surplus vs. Borrowing

Despite achieving a primary surplus during the first half of the year—a sign of improved revenue collection and spending control—the government continues to struggle with the overall fiscal deficit. The heavy reliance on domestic banks to bridge the gap remains a significant challenge for long-term economic stability.