Pakistan’s government debt growth has slowed to its lowest in 15 years during the fiscal year 2025-26 ending in June, the country’s finance adviser said on Friday, highlighting improved fiscal management and reduced risks to the economy.
Debt growth rate drops to 5%
Finance Adviser Khurram Schehzad denied reports suggesting Pakistan’s central government debt stood at Rs97-100 trillion (up to $359 billion), saying the figure also included private sector liabilities. Citing central bank data, he said public debt currently stands at Rs81.9 trillion ($294.2 billion).
“Central Government Debt grew 23 percent in FY23,” Schehzad said on X. “It is now growing at only 5 percent FYTD (fiscal year to date) — the lowest pace in the last 15 years, compared with a historical average of around 12 percent per year.”
Debt-to-GDP ratio improves
The globally accepted measure to gauge government debt is the debt-to-GDP ratio, not absolute rupee amounts, according to the official. “Pakistan’s debt-to-GDP has fallen from around 76 percent in FY19/20, remained around 75 percent through FY22/23, and has now declined to around 68 percent in FY26,” he said.
“More importantly, external debt-to-GDP has fallen from around 28 percent in FY19/20, remained around 28 percent through FY22/23, and is now down to around 21 percent in FY26— significantly reducing external repayment risks.”
Reduced refinancing risk and interest burden
The average domestic debt maturity has increased from 2.8 years to 3.8 years, significantly reducing refinancing risk. Interest expense has declined from Rs8.89 trillion ($31.94 billion) to about Rs6.94 trillion ($24.96 billion) in FY26, according to the official.
Interest payments consumed around 64 percent of gross federal revenues in FY23 at the peak, which have now fallen to around 40 percent in FY26. Import cover has improved from less than 2 weeks in 2023 to nearly three months. A significant share of reserve accumulation now comes from non-debt sources, improving the quality of reserves.
Positive outlook for debt sustainability
“Every government borrows. Every government repays. Every government refinances maturing debt,” Schehzad said. “The real question is whether debt is becoming more sustainable, more affordable, and less risky. Today, the answer is yes.”
Pakistan has long relied on loans to bridge persistent gaps in public finances and foreign exchange reserves, driven by a narrow tax base, chronic trade deficits, rising debt-servicing costs and repeated balance-of-payments pressures. The latest data indicates a significant turnaround in fiscal management.
