Pakistan’s Debt Outlook ‘More Sustainable’ Despite Rising Rupee Figures: Finance Ministry

ISLAMABAD (September 16, 2025):

The Ministry of Finance has stated that Pakistan’s debt trajectory is “more sustainable today than suggested by headline rupee figures”, highlighting improvements in the debt-to-GDP ratio, early loan repayments, reduced refinancing risks, and lower interest costs.

📌 Debt-to-GDP Improvement

According to the Finance Division, absolute debt numbers naturally rise with inflation and are not standalone indicators of sustainability. Instead, the debt-to-GDP ratio — the globally accepted yardstick — has improved, declining from 74% in FY22 to 70% in FY25.

📌 Early Repayments & Interest Savings

• The government prepaid Rs2,600 billion in obligations across commercial and central bank loans, reducing rollover and refinancing risks.
• These measures saved hundreds of billions of rupees in interest costs, contributing to fiscal stability.

📌 Fiscal Performance

• Federal fiscal deficit: Rs7.1 trillion in FY25, down from Rs7.7 trillion in FY24.
• As a share of GDP: deficit fell to 6.2% (5.4% consolidated) from 7.3% (6.8% consolidated) last year.
• Pakistan posted a historic primary surplus of 2.4% of GDP (Rs2.7 trillion) for the second consecutive year.

📌 Debt Management & External Accounts

• Total debt stock rose 13% year-on-year, below the 17% average growth over the past five years.
• Average debt maturity improved to 4.5 years in FY25 versus 4 years previously, while domestic debt maturity increased to 3.8 years from 2.7 years.
• Interest expense savings amounted to Rs850 billion due to lower rates and prudent liability management.
• On the external side, Pakistan recorded a $2 billion current account surplus in FY25 — the first in 14 years.

📌 Valuation Effects

The ministry clarified that part of the increase in external debt is due to exchange-rate movements (about Rs800 billion) and balance of payments support such as IMF inflows and Saudi Oil Fund facilities, rather than new net borrowing.

Conclusion: The Finance Ministry stressed that Pakistan’s debt management strategy remains focused on debt-to-GDP reduction, early repayments, reduced refinancing risks, and a stronger external account, ensuring a more sustainable fiscal outlook.