The Ministry of Finance (MoF) on Tuesday said Pakistan’s debt management strategy remains focused on reducing the debt-to-GDP ratio, cutting refinancing risks, and saving interest costs to ensure long-term fiscal stability.
In a statement, the ministry dismissed concerns over the absolute size of public debt, stressing that debt sustainability is measured globally in relation to the size of the economy. It said Pakistan’s debt-to-GDP ratio has declined to 70% in fiscal year 2025 from 74% in FY22.
For the first time in the country’s history, the government prepaid Rs. 2.6 trillion before maturity on commercial and central bank obligations, which the ministry said lowered rollover and refinancing risks while generating “hundreds of billions” in interest savings.
The federal fiscal deficit narrowed to Rs. 7.1 trillion in FY25 from Rs. 7.7 trillion in FY24, equivalent to 6.2% of GDP, compared with 7.3% a year earlier. Pakistan also recorded a primary surplus of 2.4% of GDP, or Rs. 2.7 trillion, for the second year in a row.
The ministry said prudent liability management, along with lower interest rates, cut interest expenses by more than Rs. 850 billion compared with budgeted allocations. Interest spending in the FY26 budget was set at Rs. 8.2 trillion, down from Rs. 9.8 trillion in FY25.
Debt maturity has also strengthened, with the average time to maturity improving to 4.5 years in FY25 from four years in FY24. Domestic debt maturity rose to 3.8 years from 2.7 years.
On the external front, Pakistan posted a $2 billion current account surplus in FY25, the first in 14 years. The ministry noted that part of the rise in external debt reflected inflows from the IMF’s Extended Fund Facility and non-cash commodity financing, such as the Saudi Oil Fund, while about Rs800 billion was due to exchange-rate valuation effects rather than new borrowing.
The ministry concluded that Pakistan’s debt trajectory is “more sustainable today than suggested by headline rupee figures,” citing progress on debt-to-GDP reduction, early repayments, lower interest costs, and a stronger external position.
