The Finance ministry has emphasized Pakistan’s commitment to sustainable fiscal management, focusing on reducing debt-to-GDP ratio and minimizing refinancing risks. The ministry said absolute debt figures, which rise with inflation, are not meaningful alone. Instead, debt sustainability should be measured relative to GDP. By this standard, Pakistan’s debt-to-GDP ratio improved from 74% in FY22 to 70% in FY25.
According to the Finance ministry, the government has prioritized early debt repayments and risk reduction. For the first time in history, Pakistan prepaid Rs 2,600 billion before maturity across commercial and central bank obligations. This strategy has lowered rollover and refinancing risks and saved taxpayers hundreds of billions in interest costs.
The federal fiscal deficit also declined, standing at Rs 7.1 trillion in FY25, down from Rs 7.7 trillion in FY24. As a share of GDP, the deficit fell to 6.2% from 7.3%, while the consolidated deficit decreased from 6.8% to 5.4%. Pakistan posted a historic primary surplus of 2.4% of GDP, or Rs 2.7 trillion, for the second consecutive year. Total debt stock grew 13% year-on-year, below the five-year average of 17%.
Prudent liability management and reduced interest rates in FY25 led to Rs 850 billion in interest savings compared to budgeted amounts. The interest allocation for the current fiscal year has been lowered to Rs 8.2 trillion from Rs 9.8 trillion in FY25. Average public-debt maturity improved to 4.5 years, up from 4.0 years, while domestic debt maturity rose to 3.8 years from 2.7 years.
The Finance ministry also highlighted the positive impact on the external account. Pakistan recorded a USD 2.0 billion current account surplus in FY25, the first in 14 years, reducing external financing needs. Some external debt increases were due to exchange-rate valuation effects, not new borrowing.
The ministry reaffirmed that Pakistan’s debt trajectory is more sustainable than headline rupee figures suggest. Continued focus on debt-to-GDP reduction, early repayments, lower interest costs, and a stronger external account underscores the government’s commitment to responsible fiscal management.
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