ISLAMABAD: The Ministry of Finance has reiterated that Pakistan’s debt trajectory is more sustainable than suggested by headline rupee figures, citing improvements in the debt-to-GDP ratio, early loan repayments, lower interest costs, and a stronger external account.
In a statement issued by the Finance Division on Tuesday, the ministry emphasized that its debt management strategy focuses on aligning the public debt-to-GDP ratio with the Fiscal Responsibility and Debt Limitation Act, minimizing refinancing risks, and generating interest savings to support sustainable public finances.
“The Ministry of Finance reiterates that absolute numbers, which rise with inflation, are not meaningful indicators of sustainability on their own,” the statement said, highlighting that the appropriate measure of sustainability is the debt-to-GDP ratio.
According to the ministry, Pakistan’s debt-to-GDP ratio has improved, declining from 74% in FY22 to 70% in FY25, while the government has reduced refinancing risks and saved taxpayers billions in interest costs.
The statement also noted that the government prepaid Rs2,600 billion before maturity, reducing rollover risks and generating significant interest savings. On the fiscal side, the federal fiscal deficit for FY25 stood at Rs7.1 trillion, lower than Rs7.7 trillion in FY24, with a primary surplus of 2.4% of GDP.
Despite a rise in total debt stock by 13% year-on-year, the government achieved a 17% average growth reduction compared to the past five years. The ministry also highlighted interest savings of over Rs850 billion compared to the budgeted amount, thanks to prudent liability management and a reduction in interest rates.
Furthermore, the government’s early debt retirement has improved the debt maturity profile, reducing refinancing risks and enhancing sovereign debt resilience. The current account surplus of $2 billion in FY25, the first in 14 years, is a result of this effective fiscal management.
The ministry concluded that the government’s focus remains on reducing the debt-to-GDP ratio, making early repayments, lowering interest costs, and strengthening the external account.
