Pakistan’s public debt burden has eased noticeably over the past three years as tighter fiscal controls and a revised borrowing strategy helped improve the country’s financial position, according to the federal government.
Officials said the debt to GDP ratio is estimated to fall to 68.5 percent in fiscal year 2025 to 2026, down from 75.2 percent in fiscal year 2022 to 2023. The improvement comes as the government continues efforts to contain borrowing while strengthening public finances.
A spokesperson for the federal government said Pakistan has also recorded primary fiscal surpluses for three consecutive years from fiscal year 2024 through fiscal year 2026. A primary surplus means government revenues exceeded expenditures before interest payments, a key measure closely watched by lenders and investors.
The spokesperson added that growth in public debt during the first 11 months of the current fiscal year slowed to just 5 percent, marking the lowest pace in 15 years. By comparison, average debt growth stood at 13.7 percent between fiscal years 2011 and 2025. The sharpest annual increase came in fiscal year 2023, when public debt expanded by 23 percent.
According to the government, recent increases in public debt were driven by financing requirements rather than any change in debt management policy. Officials said a greater share of domestic borrowing has helped reduce Pakistan’s exposure to exchange rate fluctuations and lowered the risks linked to refinancing external debt.
The government’s Medium Term Debt Management Strategy aims to keep external debt below 40 percent of total public debt. At present, domestic borrowing accounts for about 69 percent of the debt portfolio, while external debt makes up the remaining 31 percent.
To widen its funding sources, the government has introduced several new investment options. These include JazzCash Treasury Bills, InvestPak, National Savings products offered through the Central Directorate of National Savings, the Roshan Digital Account programme, and longer term as well as zero coupon Pakistan Investment Bonds.
Officials said longer maturity Pakistan Investment Bonds and Government Ijara Sukuk have attracted greater participation from insurance companies and pension funds. They expect these efforts to gradually reduce reliance on commercial banks and free up more financing for private businesses.
The government also said it has taken advantage of lower inflation and declining interest rates by increasing borrowing through medium and long term bonds and Sukuk. As a result, the average maturity of domestic debt has risen from 2.8 years in June 2024 to around 3.9 years, reducing refinancing pressure.
The government plans to introduce three month and six month Sukuk aimed mainly at retail investors, expressing confidence that broader investor participation and continued fiscal discipline will support sustainable economic growth while reducing dependence on bank financing.
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