Pakistan’s external debt and liabilities have climbed to nearly $130 billion, with the bulk—almost 58%—denominated in US dollars, according to the government’s latest Debt Management Strategy (DMS) 2026–2028.
The report underscores the country’s dependence on a limited set of foreign currencies, a factor that heightens the risks of managing debt amid global economic uncertainty.
“The external debt stock is heavily concentrated in a few currencies. The US Dollar makes up 57.8%, followed by Special Drawing Rights (SDRs) at 29.88%, Chinese Yuan at 5.21%, Japanese Yen at 3.95%, and the Euro at 2.62%,” the DMS stated.
To tackle this mounting debt challenge, the Finance Ministry has proposed diversifying financing avenues. While concessional loans from multilateral and bilateral partners will remain central, Pakistan aims to return to global markets with fresh instruments such as Panda Bonds, Sustainable Bonds, and Eurobonds.
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As part of this strategy, a $1 billion Panda Bond program has been finalized, with the first tranche—between $200 million and $250 million—planned for issuance in FY2026. These Chinese market–denominated securities are expected to help reduce borrowing costs, mitigate refinancing risks, and further strengthen financial ties with Beijing.
In parallel, the government is preparing to introduce Sustainable Bonds, supported by a newly designed Sustainable Financing Framework currently under cabinet review. This framework will determine the structure, tenor, and repayment conditions for upcoming green and sustainable financing initiatives.