The Ministry of Finance has informed the National Assembly that proactive debt management strategies have reduced interest expenses by over Rs850 billion in fiscal year 2024–25 and helped create additional fiscal space.
In a written reply during the Question Hour, the ministry said the measures included a shift toward medium- and long-term securities, reduced short-term issuances, the country’s first sovereign debt buybacks, and the introduction of long-term zero-coupon bonds. It added that these steps enabled the government to lower its budgeted interest expenditure from Rs9.7 trillion in FY24 to Rs8.2 trillion in the FY26 budget.
Responding to a question by MNA Asif Khan, the ministry said that, according to the Auditor General’s Report for 2024–25, total expenditure in FY24 stood at Rs39.9 trillion. Of this, Rs8.2 trillion (20.55%) went to debt servicing, Rs26.4 trillion (66.14%) to principal loan repayments, and 13% to socio-economic functions.
The ministry said the federal government’s development spending (PSDP) increased from Rs732 billion in FY24 to Rs1,049 billion in FY25, a 43% year-on-year rise. It noted that as inflation declined in the second half of FY24, the government issued securities at rates below the policy rate, reducing interest costs further.
It added that Pakistan’s debt is mainly obtained to finance fiscal deficits, but primary surpluses recorded in the last two fiscal years have helped narrow the overall deficit and slow the pace of debt accumulation.
