Finance Ministry rejects Rs20 billion daily debt claim, says debt to GDP ratio fell to 68%

The Ministry of Finance has rejected claims that government debt increased by Rs20 billion per day under Prime Minister Shehbaz Sharif,

Islamabad:  The Ministry of Finance has rejected claims that government debt increased by Rs20 billion per day under Prime Minister Shehbaz Sharif, calling the report incomplete and warning that it could give a misleading picture of Pakistan’s financial position. The ministry says the country’s debt burden has actually fallen in relation to the size of the economy, debt growth has slowed to its lowest level in two decades, and the cost of paying interest and other debt charges has declined.

In its clarification, the ministry said that simply dividing the increase in total outstanding debt by the number of days does not accurately show how much new borrowing took place or whether the country’s ability to manage its debt has improved.

According to the ministry, government debt fell from 75 percent of the country’s gross domestic product at the end of financial year 2022 to 23 to 68 percent at the end of financial year 2025 to 26. The debt to GDP ratio compares government debt with the total value of goods and services produced by the economy. The ministry says this measure provides a better understanding of the country’s ability to carry its debt than looking at the nominal amount alone.

The ministry also reported a sharp slowdown in the rate at which government debt has been growing. Government debt increased by around 26 percent in the financial year 2022 to 23, but growth slowed to 7.7 percent in the financial year 2025 to 26. It described the latest rate as the lowest in two decades, compared with an average annual increase of 16.7 percent between financial years 2006 to 07 and 2025 to 26.

The ministry further said that central government debt declined by approximately Rs689 billion between June and August 2026, according to the latest data cited in its clarification. This was presented as evidence that the debt position can change over time and should not be judged only by calculating an average daily increase across a longer period.

On external debt, the ministry said Pakistan’s position had also improved when measured against the size of the economy. Public sector external debt fell from 33 percent of GDP in financial year 2022 to 23 to 23 percent by the end of financial year 2025 to 26.

The clarification compared the increase in external debt over two different periods. From the end of financial year 2021 to 22 to the end of financial year 2025 to 26, public sector external debt rose from $100 billion to $106.8 billion, an average increase of around $1.7 billion per year.

By contrast, between the end of financial year 2014 to 15 and the end of financial year 2021 to 22, the same measure increased from $54.7 billion to $100 billion, an average rise of around $6.4 billion per year. The ministry used this comparison to argue that external debt has been increasing much more slowly in recent years.

The government also reported a reduction in the cost of servicing its debt. Debt servicing costs fell from Rs8.9 trillion in financial year 2024 to 25 to an estimated Rs6.9 trillion in financial year 2025 to 26.

The share of gross federal revenue spent on debt servicing also declined, from 64 percent in financial year 2022 to 23 to 38 percent in financial year 2025 to 26. This means a smaller share of federal revenue was being used to meet debt servicing costs, according to the ministry.

It further said Pakistan had repaid around Rs5.9 trillion in expensive debt ahead of schedule during financial year 2024 to 25, financial year 2025 to 26 and the early part of financial year 2026 to 27.

The average repayment period of domestic debt increased from 2.7 years in the financial year 2023 to 24 to around four years. The ministry said longer repayment periods help reduce immediate repayment pressure by giving the government more time to return borrowed money.

Foreign exchange reserves have also strengthened, according to the ministry. Reserves increased from an earlier low of $2.9 billion to $21.5 billion by September 2026. Foreign exchange reserves are important because they help a country pay for imports and meet its international payment obligations.

The ministry argued that these developments show an improvement in Pakistan’s ability to manage its debt and meet external payments. It said the fall in the debt to GDP ratio, slower debt growth, lower servicing costs and stronger foreign exchange reserves should be considered together when assessing the country’s financial position.