Pakistan’s debt growth falls to 20-year low: Finance Ministry

Pakistan’s Finance Ministry has reported a significant slowdown in the country’s debt growth, saying the

ISLAMABAD: Pakistan’s Finance Ministry has reported a significant slowdown in the country’s debt growth, saying the rate of increase fell to its lowest level in two decades during fiscal year 2025-26.

According to the ministry, Pakistan’s debt increased by only 7.7 per cent during 2025-26, compared with an average annual growth rate of around 16 per cent over the past 20 years.

The ministry said the country’s debt-to-GDP ratio also improved, falling to 68.3 per cent from 75 per cent in fiscal year 2022-23. Between 2019 and 2021, the ratio had remained between 86 and 88 per cent.

Pakistan’s external debt-to-GDP ratio also declined to 21.5 per cent, which the ministry described as the lowest level in nine years.

The country’s foreign exchange reserves have meanwhile increased substantially, rising from $2.9 billion to $18.4 billion, according to the ministry.

The Finance Ministry said Pakistan also repaid Rs4.72 trillion in debt ahead of schedule. It added that annual interest expenditure on government debt declined by nearly Rs2 trillion.

The burden of interest payments on government revenue also fell sharply, from 61 per cent to 35 per cent, indicating an improvement in the government’s fiscal position.

The ministry further said Pakistan has recorded a primary budget surplus for three consecutive years, reflecting continued efforts to strengthen fiscal management and control expenditure.

Pakistan has also returned to international capital markets after a four-year gap. The country’s Panda Bond reportedly attracted demand nearly five times higher than the amount offered, indicating strong investor interest.

The ministry also highlighted Pakistan’s improved credit outlook. S&P Global Ratings has maintained Pakistan’s rating at B with a stable outlook, with the ministry describing the current rating as the agency’s highest level for Pakistan in nearly nine years.