ISLAMABAD: The Ministry of Finance has stated that Pakistan’s debt position has improved when measured by international standards. In a detailed statement, the ministry explained that while absolute debt numbers are higher due to inflation, the more accurate measure is the debt-to-GDP ratio, which has declined from 74% in FY22 to 70% in FY25. This, it claims, reflects improved debt sustainability and responsible fiscal management.
The ministry attributed this improvement to early debt repayments, reduced interest rates, and stronger external accounts. It highlighted that nearly Rs2.6 trillion in commercial and central bank debt was repaid ahead of time, which reduced refinancing risks and saved taxpayers billions in interest. The average debt maturity period has also increased, improving financial stability.
Despite the State Bank of Pakistan (SBP) reporting a Rs8.97 trillion increase in total debt over the past year, the ministry argues that this growth is slower than in previous years. Total debt rose by 13% year-on-year, compared to the five-year average of 17%. The ministry noted a record $2 billion current account surplus in FY25 as further proof of sound financial strategy.
The FY26 budget allocates Rs8.2 trillion for debt servicing, slightly down from Rs9.8 trillion in FY25, signaling modest relief.
The ministry defended its approach, saying global metrics support its claim of progress. It reiterated that public debt levels must be assessed against the size of the economy, not just in absolute numbers. It emphasized continued efforts to reduce risk, save on interest payments, and maintain macroeconomic stability through disciplined borrowing and fiscal responsibility.