By Qudsia Bano
Pakistan’s debt story is taking a new turn — one that shows the country slowly moving away from short-term borrowing and relying more on long-term instruments.
Pakistan long-term debt is now increasingly managed through instruments like Pakistan Investment Bonds (PIBs), signaling a major shift in financial strategy.
Official data reveals that by June 2025, 64 percent of Pakistan’s domestic debt was locked in Pakistan Investment Bonds (PIBs), marking a major change in how the government manages its finances.
According to figures shared with this reporter, the country’s total public debt stood at PKR 80.5 trillion by the end of fiscal year 2025. Out of this, domestic debt made up PKR 54.47 trillion, or nearly 68 percent, while external debt amounted to PKR 26.05 trillion, about 32 percent of the total.
Pakistan Long-Term Debt Sees Major Shift to PIBs
PIBs continue to dominate the domestic debt portfolio. The government has focused on longer-term borrowing to avoid the constant pressure of refinancing short-term loans.
But there’s a catch — almost two-thirds of these bonds carry floating interest rates, which means the government’s costs could rise if the central bank increases rates.
Domestic Debt Breakdown: MTBs, Sukuk, and National Savings
Market Treasury Bills (MTBs) make up around 16 percent of domestic debt, while Islamic instruments like Sukuk have grown to about 11.7 percent. Another 6 percent comes from unfunded sources, including National Savings Schemes and prize bonds, with smaller instruments filling out the rest.
Benefits and Risks of Long-Term Borrowing in Pakistan
This growing shift toward long-term borrowing reflects the government’s aim to make its debt more sustainable. However, the continued use of floating-rate bonds still leaves Pakistan’s finances exposed to interest rate changes.
On the foreign side, most of Pakistan’s external debt remains concessional — meaning it comes with relatively low interest rates and easier repayment terms. Multilateral and bilateral lenders together hold over 72 percent of the country’s total foreign debt.
Multilateral sources, including the IMF, account for more than half of the total, while bilateral lenders make up around a quarter.
Maturity Periods and Future Debt Risks
The average time to maturity for domestic debt improved from 2.8 years to 3.8 years during FY2025, mainly due to the shift from short-term Treasury Bills to longer-term PIBs.
In contrast, the maturity period for external debt slightly declined from 6.2 years to 6.1 years, reflecting a small rise in short-term commercial borrowing.
Experts say Pakistan has made progress in reshaping its debt structure and reducing short-term pressure.
Still, they caution that keeping this progress on track will depend on stable economic growth, steady interest rates, and a stronger focus on low-cost, long-term financing to reduce future risks.
Author Profile
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Qudsia Bano is a financial correspondent focused on Pakistan's fiscal health.
Her reporting, driven by SBP data, tracks the country's vital foreign exchange reserves. Bano’s work highlights the central bank's success in stabilizing reserves near the $19-20 billion range, underscoring its crucial effort to maintain exchange rate stability.
