Pakistan makes record $4.3bn early debt repayment

KARACHI: Pakistan has made its largest-ever single early repayment of domestic debt, retiring Rs1.2 trillion ($4.3 billion) owed to the State Bank of Pakistan (SBP) before maturity.

Finance Minister Muhammad Aurangzeb’s adviser Khurram Shehzad said on Saturday that the latest payment was part of the government’s efforts to improve the country’s debt position and reduce refinancing pressures.

With the latest repayment, Pakistan has retired around Rs5.92 trillion ($21.3 billion) in domestic debt ahead of schedule since October 2024.

Shehzad said the latest transaction exceeded the previous record of Rs1.133 trillion, which was repaid to the central bank in August 2025.

The government had also made an earlier Rs500 billion repayment in June 2025. The payments are aimed at reducing the debt burden and improving the maturity structure of government liabilities.

According to Shehzad, Pakistan retired about Rs1.8 trillion ($6.5 billion) in domestic debt ahead of maturity during fiscal year 2025. The amount increased to around Rs2.9 trillion ($10.5 billion) in fiscal year 2026.

The latest Rs1.2 trillion payment was made less than two months after the beginning of the current fiscal year in July.

Despite the early repayments, Pakistan’s domestic debt remains substantial. State Bank data showed that government domestic debt reached Rs59.44 trillion ($214.2 billion) by the end of June, compared with Rs54.47 trillion ($196.3 billion) a year earlier.

Debt servicing continues to place significant pressure on the federal budget. The government has allocated Rs8.05 trillion for interest payments during the fiscal year ending June 2027.

The amount represents about 43 per cent of the federal government’s total expenditure, which has been budgeted at Rs18.77 trillion.

The government has been working to extend debt maturities and reduce its reliance on short-term borrowing. A greater share of short-term debt can expose public finances to refinancing pressures and changes in interest rates.

Pakistan is also pursuing fiscal reforms under its $7 billion programme with the International Monetary Fund (IMF). The government has committed to maintaining fiscal discipline and achieving a primary surplus of 2 per cent of GDP during the current fiscal year.

Shehzad described the early repayments as part of a broader move towards active management of the country’s liabilities.

He said the government was increasingly focusing not only on meeting debt repayments when they become due but also on strengthening the overall sovereign balance sheet.