Pakistan Domestic Debt Falls to Rs57.7tr in July-Sept
Pakistan domestic debt fell by Rs1.636 trillion in the first three months of the current fiscal year, new State Bank data shows. The total stood at Rs57.757 trillion at the end of September, down from Rs59.393 trillion on June 30.
The fall reverses the trend of the preceding year, when government borrowing climbed steadily. It comes as the government works to tighten the deficit under its IMF programme, with revenue rising each year and the fiscal deficit narrowing.
Pakistan domestic debt: where the fall came from
The sharpest change came in borrowing from scheduled banks. The government’s net retirement of scheduled-bank debt rose to Rs1.847 trillion in the first four months of the fiscal year, up from Rs45 billion in the same period last year. In plain terms, debt repayments exceeded new borrowing by a wide margin.
Borrowing through long-term Pakistan Investment Bonds, known as PIBs, fell by Rs1.756 trillion to Rs33.543 trillion at the end of the first quarter. The government has long said it prefers long-term bonds over short-term borrowing, and the latest figures show that shift in action.
Borrowing through short-term Treasury bills also fell, by Rs1.163 trillion to Rs9.640 trillion in the first quarter of the fiscal year. Together, the two moves cut the government’s domestic borrowing across both long and short maturities.
External debt moved the other way
The picture was different for external debt. In rupee terms, it rose from Rs24.2 trillion on June 30 to Rs24.9 trillion on September 30, an increase of Rs700 billion over the quarter.
The quarterly fall also needs honest context. Over the 12 months to September 30, total domestic debt still rose by Rs4.331 trillion to Rs57.757 trillion. The State Bank data shows the increase was concentrated in the last fiscal year, FY26, rather than in the current year. The first quarter of FY27 broke the pattern, but one quarter does not erase a year of rising debt.
Why the fall matters
Domestic debt is the money the government borrows inside Pakistan, mainly from banks and investors who buy its bonds and bills. When that borrowing falls, banks have more room to lend to businesses and households. Lower borrowing can also ease the interest burden on the budget over time, since the government pays markup on every rupee it owes.
Planning Minister Ahsan Iqbal recently said the fiscal deficit narrowed to 2.6 per cent of GDP in FY26, compared with 5.4 per cent in FY25. He described it as the lowest fiscal deficit recorded in two decades.
The debt figures sit beside the budget numbers released by the Finance Ministry on Friday. Those figures showed a first-quarter budget surplus of Rs1.274 trillion, equal to 0.9 per cent of GDP, the third year in a row that the July to September quarter has ended in surplus. The surplus was smaller than last year’s Rs2.12 trillion, but it points in the same direction as the debt data: the government borrowed less in the quarter.
What happens next
The government plans to tighten the deficit further this fiscal year, with revenue rising and spending under tighter control. The next State Bank release will show whether the first-quarter fall in domestic debt holds, or whether borrowing picks up again in the winter months.
For now, the numbers mark a clear break. After a year in which domestic debt rose by more than Rs4 trillion, the first three months of FY27 took Rs1.636 trillion off the total.
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Frequently asked questions
How much did Pakistan’s domestic debt fall?
It fell by Rs1.636 trillion in the first quarter of FY27, from Rs59.393 trillion on June 30 to Rs57.757 trillion on September 30, according to State Bank data.
What are Pakistan Investment Bonds?
PIBs are long-term bonds the government sells to banks and investors to raise money. Borrowing through PIBs fell by Rs1.756 trillion in the quarter, to Rs33.543 trillion.
Did all government debt fall?
No. External debt rose in rupee terms, from Rs24.2 trillion to Rs24.9 trillion over the same quarter. Domestic debt also remains higher than a year ago, up Rs4.331 trillion over 12 months.
Why does lower domestic debt matter?
When the government borrows less from banks inside Pakistan, more credit is left for businesses and households. It can also reduce the interest the state pays on its debt over time.
What did the budget figures show?
The Finance Ministry reported a first-quarter budget surplus of Rs1.274 trillion, or 0.9 per cent of GDP, the third straight year the July to September quarter ended in surplus.
