Key Takeaways
- Pakistan's debt-to-GDP ratio has decreased from 75.2% in FY 2022-23 to an estimated 68.5% by FY 2025-26.
- Primary fiscal surpluses were achieved for three consecutive years, with domestic borrowing reducing external refinancing risks.
- The government is diversifying its investor base through various schemes and Sukuk issuance.
Pakistan's federal government has reported significant improvements in the country’s debt profile due to enhanced fiscal discipline. According to a spokesperson of the Federal Government, the debt-to-GDP ratio has dropped from 75.2% in fiscal year (FY) 2022-23 to an estimated 68.5% by FY 2025-26.
The government's commitment to fiscal consolidation is evident through its achievement of primary fiscal surpluses for three consecutive years, from FY 2024 to FY 2026. This has not only reduced the debt-to-GDP ratio but also brought down the growth rate of public debt during the first 11 months of the current fiscal year to a 15-year low of 5%, compared with an average growth of 13.7% recorded over FY 2011-2025.
The spokesperson highlighted that despite the highest increase in public debt of 23% witnessed in FY 2023, this was due to fiscal financing requirements rather than a shift in debt management policy. He noted that greater reliance on domestic borrowing has reduced exposure to exchange rate volatility and external refinancing risks. The government's Medium-Term Debt Management Strategy (MTDS) aims to keep external debt below 40% of total public debt, currently standing at around 69% domestic and 31% external.
To further diversify the investor base, the government has introduced several initiatives such as JazzCash Treasury Bills, InvestPak, National Savings schemes through the Central Directorate of National Savings (CDNS), the Roshan Digital Account (RDA) programme, long-tenor PIBs, and Government Ijara Sukuk (GIS). These measures have broadened participation by insurance companies and pension funds. The government is also planning to introduce short-term Sukuk with three- and six-month tenors, targeting retail investors.
The spokesperson emphasized that the government is taking advantage of improved macroeconomic conditions, including declining inflation and lower interest rates, to shift borrowing towards medium- and long-term PIBs and Sukuk. As a result, the Average Time to Maturity (ATM) of domestic debt has increased from 2.8 years in June 2024 to around 3.9 years, significantly reducing rollover risk.
Regarding short-term Market Treasury Bills (MTBs), the spokesperson clarified that their higher issuance is temporary and driven by prevailing market conditions following heightened geopolitical uncertainty and changing interest rate expectations. He expressed confidence that continued fiscal consolidation and efforts to diversify the investor base would further reduce dependence on bank borrowing while supporting increased lending to the private sector, contributing to sustainable economic growth.
The government’s debt growth during the first 11 months of the current fiscal year had declined to a 15-year low of 05 percent, compared with the average growth of 13.7 percent recorded during FY 2011-2025.
Spokesperson of the Federal Government
The government’s Medium-Term Debt Management Strategy (MTDS) envisages keeping external debt below 40 percent of total public debt. At present, the debt composition stands at around 69 percent domestic and 31 percent external.
Spokesperson of the Federal Government
