Govt borrows Rs396bn debt in just one week, highlighting persistent fiscal pressures as Pakistan navigates the ongoing challenges of FY2026. According to the State Bank of Pakistan’s (SBP) weekly estimates, the federal and provincial governments collectively added Rs396.07 billion in new debt during the week ended December 26, 2025, bringing total net borrowing for the current fiscal year to Rs90.94 billion.
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This sharp weekly increase reflects continued reliance on domestic financing to manage budgetary needs, commodity operations, and other fiscal obligations raising important questions about liquidity management, inflation risks, and banking sector exposure.
Govt Borrows Rs396bn Debt: Weekly Borrowing Breakdown
Government borrowing is officially classified into three major categories based on purpose:
• Budgetary Support
• Commodity Operations
• Others
During the reported week, the overwhelming share of borrowing was directed toward budgetary support, underscoring ongoing revenue-expenditure gaps.
In simple terms, nearly the entire Rs396bn weekly borrowing was used to finance routine government spending, while commodity-related borrowing remained marginal and some debt was retired under other heads.
Fiscal Year 2026 Borrowing Position So Far
On a cumulative basis, Pakistan’s government borrowing pattern for FY2026 presents a mixed picture. While weekly borrowing remains volatile, the overall fiscal year numbers show controlled but still concerning dependence on domestic debt.
So far in FY2026:
• Budgetary support borrowing stands at Rs72.69bn, indicating continued pressure on government finances.
• Commodity operations account for Rs19.82bn, largely linked to food security and price stabilization mechanisms.
• Other borrowings show a net retirement of Rs1.57bn, offering slight relief on the margins.
This structure confirms that fiscal stress is being driven mainly by budgetary financing requirements, rather than extraordinary commodity shocks.
Govt Borrows Rs396bn Debt: Role of SBP and Scheduled Banks
Two institutions remain central to government financing:
State Bank of Pakistan (SBP)
Interestingly, despite the latest borrowing surge, the government has repaid a net Rs1.36 trillion to the SBP during FY2026.
This repayment includes:
• Significant retirement by the Federal Government
• Partial offset through borrowing by Provincial Governments
• Net retirements by AJK and Gilgit-Baltistan governments
This trend aligns with IMF-backed reforms aimed at limiting direct central bank financing, which is often linked to inflationary pressures.
Scheduled Banks
In contrast, scheduled banks have become the primary source of government borrowing.
During FY2026:
• The government borrowed a net Rs1.43 trillion from scheduled banks
• The Federal Government alone accounted for Rs1.51 trillion
• Provincial governments, however, recorded net retirements
This shift highlights growing reliance on commercial banks, potentially crowding out private sector credit.
Economic Implications of Govt Borrowing Trends
The fact that govt borrows Rs396bn debt in a single week raises several red flags for policymakers and investors alike:
• Rising domestic debt increases future debt servicing costs
• Bank liquidity concentration in government securities may restrict private investment
• Fiscal consolidation targets could come under pressure if revenue growth lags
• Inflation management remains closely tied to borrowing patterns and monetary policy coordination
While repayment to SBP is a positive structural reform, heavy reliance on scheduled banks keeps fiscal risks elevated.
Outlook: Can Borrowing Stay Sustainable?
Looking ahead, Pakistan’s borrowing trajectory will depend on:
• Tax revenue performance
• IMF program compliance
• Privatization and non-tax revenue flows
• Interest rate and inflation trends
Without meaningful fiscal reforms, weekly spikes like this one may continue to challenge macroeconomic stability.