Islamabad, September 16, 2025 – Pakistan’s Ministry of Finance has reported that the country’s debt sustainability has improved over the last three fiscal years, with the debt-to-GDP ratio declining from 74 percent in Fiscal Year 2022 to 70 percent in Fiscal Year 2025.
Officials attribute this progress to early repayments, better liability management, and substantial savings on interest payments.
According to a statement issued by the ministry, the government’s debt management strategy continues to revolve around aligning public debt with the Fiscal Responsibility and Debt Limitation Act. The policy also seeks to minimize refinancing risks while securing savings for the exchequer.
The ministry explained that public discussion often focuses on the absolute size of debt, which naturally rises due to inflation and currency effects. However, it stressed that the internationally accepted benchmark for sustainability is the debt-to-GDP ratio, which compares overall obligations with the size of the economy. “By this measure, Pakistan’s debt position has strengthened, with refinancing risks falling and interest costs reduced,” the statement noted.
For the first time in the country’s history, the government prepaid Rs 2,600 billion worth of obligations before maturity, covering both commercial and central bank liabilities. This move, the ministry said, eased rollover risks and generated hundreds of billions in savings.
On the fiscal side, the federal deficit stood at Rs 7.1 trillion in FY25, lower than Rs 7.7 trillion in the previous year. As a percentage of GDP, the deficit fell to 6.2 percent, while the consolidated deficit was recorded at 5.4 percent. Notably, Pakistan posted a historic primary surplus of 2.4 percent of GDP – or Rs 2.7 trillion – for the second consecutive year.
The total debt stock rose by 13 percent year-on-year, which the ministry pointed out was below the five-year average growth rate of 17 percent. At the same time, prudent liability management and lower interest rates delivered savings of over Rs 850 billion in FY25, compared to the budgeted cost of servicing debt.
Average maturity of public debt also improved, now standing at 4.5 years compared to 4.0 years in the previous year. Domestic debt maturity rose significantly, from 2.7 years to 3.8 years.
Externally, Pakistan recorded a current account surplus of USD 2 billion in FY25, the first in 14 years, which reduced gross financing needs. The ministry clarified that much of the external debt increase stemmed from IMF inflows, non-cash facilities such as the Saudi Oil Fund, and valuation effects from exchange rate changes, rather than new borrowing.
The ministry concluded that Pakistan’s debt outlook was now more sustainable, underscoring the government’s focus on stability, fiscal discipline, and economic resilience.