Pakistan government debt growth falls to 15-year low indicating lower risk, better management — official

Pakistan government debt growth falls to 15-year low indicating lower risk, better management — official KARACHI: Pakistan’s government debt growth slowed down to its lowest in 15 years in the fiscal year 2025-26 ending in June, the country’s finance adviser said on Friday, reflecting improved fiscal management and lower risks to the economy. Pakistan has long relied on loans to help bridge persistent gaps in public finances and foreign exchange reserves, driven largely by a narrow tax base, chronic trade deficits, rising debt-servicing costs and repeated balance-of-payments pressures. 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 which were not taken into account. Citing the central bank data, he said Pakistan’s public debt currently stood at Rs81.9 trillion ($294.2 billion). “Central Government Debt grew 23 percent in FY23,” he 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.” The globally accepted measure to gauge government debt is the debt-to-gross domestic product ration, not debt in absolute rupees, 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.” Schehzad said this was the direction “every country aims for.” 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. “Every government borrows. Every government repays. Every government refinances maturing debt,” he said. “The real question is whether debt is becoming more sustainable, more affordable, and less risky. Today, the answer is yes.”