By Moaaz Manzoor

Pakistan’s total debt and liabilities climbed to Rs97.31 trillion by the end of March 2026, reflecting continued reliance on domestic borrowing despite recent improvement in macroeconomic indicators and fiscal conditions, according to data released by the State Bank of Pakistan.

The latest SBP debt statistics showed total debt and liabilities increased from Rs95.47 trillion in December 2025 to Rs97.31 trillion by March 2026, registering a quarterly increase of around Rs1.84 trillion.

On an annual basis, the stock rose from Rs89.77 trillion in March 2025 to Rs97.31 trillion in March 2026.

The data showed domestic debt remained the largest component of Pakistan’s overall debt profile.

Government domestic debt increased to Rs 57.57 trillion by March 2026 compared with Rs 55.36 trillion in December 2025 and Rs 51.52 trillion in March 2025.

Domestic borrowing now accounts for nearly 59 percent of the country’s total debt and liabilities, highlighting the government’s continued dependence on local financing to meet fiscal requirements amid constrained external inflows.

In contrast, government external debt declined during the latest quarter.

According to SBP data, government external debt fell to Rs22.96 trillion in March 2026 from Rs23.17 trillion in December 2025. However, it remained higher than the Rs22.17 trillion recorded in March 2025.

The quarterly decline coincided with relative exchange-rate stability and repayments of external obligations during the period.

Debt owed to the International Monetary Fund also eased slightly to Rs2.76 trillion in March 2026 from Rs2.84 trillion in December 2025, although it remained above the Rs2.32 trillion level recorded a year earlier.

Similarly, Pakistan’s external liabilities remained broadly stable at Rs3.38 trillion during the quarter.

The SBP data further showed that private-sector external debt increased to Rs5.59 trillion in March 2026 from Rs5.55 trillion in December 2025 and Rs4.93 trillion in March 2025, indicating rising foreign borrowing by businesses alongside improving economic activity.

Meanwhile, public-sector enterprises’ external debt stood at Rs2.20 trillion in March 2026, remaining largely unchanged from December levels.

Overall external debt and liabilities declined marginally to Rs38.39 trillion in March 2026 from Rs38.66 trillion in December 2025. However, the stock remained significantly above the Rs36.45 trillion recorded in March last year.

The data also reflected continued growth in public debt under the Fiscal Responsibility and Debt Limitation Act (FRDLA) definition.

Total debt of the government under the FRDLA definition rose to Rs75.39 trillion by March 2026, compared with Rs73.91 trillion in December 2025 and Rs69.22 trillion in March 2025.

Pakistan’s gross public debt also increased to Rs83.28 trillion in March 2026 from Rs81.37 trillion in December 2025 and Rs76.01 trillion a year earlier.

At the same time, government deposits with the banking system expanded notably to Rs7.89 trillion by March 2026 compared with Rs7.46 trillion in December 2025.

The latest debt figures present a mixed fiscal picture for the economy.

While easing inflation, lower interest rates and improving macroeconomic stability have supported debt sustainability indicators in recent months, the overall debt stock continues to rise because of persistent fiscal deficits, refinancing needs and heavy reliance on domestic borrowing.

Pakistan’s recent fiscal indicators have shown some improvement during FY26, including lower debt-servicing costs and a fiscal surplus during the first half of the fiscal year.

However, the debt burden remains elevated relative to the size of the economy.

SBP data showed total debt and liabilities stood at 83.03 percent of GDP as of June 2025, while gross public debt accounted for 70.75 percent of GDP. Government domestic debt represented 47.86 percent of GDP, while total external debt and liabilities stood at 33.91 percent of GDP.

The growing share of domestic debt reflects the government’s effort to reduce exposure to external financing risks and exchange-rate volatility.

However, continued dependence on local borrowing may limit private-sector access to credit and maintain high banking-sector exposure to sovereign debt.

The sustainability outlook will depend heavily on Pakistan’s ability to maintain fiscal discipline, strengthen revenue mobilisation and sustain economic growth over the medium term.

Rising oil prices and geopolitical uncertainty linked to the Middle East conflict could also increase future borrowing requirements and complicate debt management in the coming quarters.

Credit: INP-WealthPk