Pakistan’s debt burden hits 15-year low

Pakistan's public debt growth has slowed to its lowest level in more than a decade, reflecting the impact of ongoing fiscal

Pakistan’s public debt growth has slowed to its lowest level in more than a decade, reflecting the impact of ongoing fiscal reforms and tighter financial management measures implemented over recent years.

According to official financial data, central government debt expanded by only five percent during the current fiscal year, a significant decline compared to the rapid increase recorded just a few years ago. Economic officials view the slowdown as evidence of a shift toward more sustainable borrowing practices and improved debt management.

Authorities have rejected claims circulating on social media that Pakistan’s debt has approached Rs100 trillion, clarifying that such figures combine government liabilities with private sector obligations. Officials maintain that central government debt currently stands at around Rs81.9 trillion and should be assessed in relation to the size of the national economy.

Pakistan’s debt-to-GDP ratio has steadily declined in recent years, while the share of external debt in the economy has also fallen, reducing the country’s exposure to currency fluctuations and external financial shocks.

The government has simultaneously extended the average maturity period of domestic borrowing, easing short-term repayment pressures and lowering refinancing risks. Financial managers say the strategy provides greater stability to public finances and improves long-term debt sustainability.

In another positive development, Pakistan recently secured international financing at one of the lowest borrowing costs in its history, signaling cautious optimism among foreign investors regarding the country’s economic outlook.

Officials also highlighted the early retirement of trillions of rupees in costly debt obligations, including liabilities owed to the central bank and market borrowings repurchased before maturity, a move aimed at reducing future interest payments.

The burden of debt servicing on the federal budget has also eased considerably. Interest payments, which previously consumed the majority of government revenues, have fallen substantially, creating additional fiscal space for development projects and public services.

Meanwhile, Pakistan’s external sector has shown signs of improvement. Foreign exchange reserves have recovered from critically low levels, while the country has recorded current account surpluses for two consecutive years after posting one of its largest deficits in 2022.

The government has additionally maintained primary fiscal surpluses for three straight years, indicating that revenues are now exceeding expenditures before interest payments are taken into account.

Economic analysts say the key challenge ahead will be maintaining reform momentum and ensuring that improvements in debt sustainability translate into stronger economic growth and greater investment in public welfare.