ISLAMABAD: Pakistan’s central government debt reached PKR 80 trillion by June 2025, with officials emphasizing that the country’s debt stock has not doubled in three years as suggested by some reports.
Certain posts placed FY22 debt at PKR 43 trillion, but the verified figure was PKR 49 trillion. The actual increase over three years is PKR 31 trillion, taking the total to PKR 80 trillion.
The pace of debt accumulation has notably slowed. After surging by 23 percent in FY22 and 28 percent in FY23, annual growth was successfully contained at 13 percent in both FY24 and FY25. This moderation stems from a record primary surplus in FY25, better debt management, and early repayments of more than PKR 2.6 trillion over the past 11 months — a first in Pakistan’s fiscal history.
Exchange rate shocks, which had previously inflated the debt stock by around PKR 10 trillion during FY22 and FY23, are now under control. The share of external debt in the total portfolio has declined from 38 percent to 32 percent, reducing exposure to currency volatility. In dollar terms, external debt has risen by just $2.9 billion over the last three and a half years. A stable rupee, current account surpluses, and record remittances of $38 billion have reinforced this position.
Investor sentiment has also recovered strongly. Pakistan’s Eurobond yields, which once traded at distressed levels of 60 percent, now stand in the 6–9 percent range. Most maturities are between 6 and 8 percent, reflecting a significant restoration of international market confidence.
Key debt sustainability indicators show improvement. The debt-to-GDP ratio has fallen from 77 percent in FY20 to about 70 percent in FY25. Fiscal consolidation also delivered major gains, cutting interest costs by PKR 850 billion in FY25. The federal deficit was contained at PKR 7.1 trillion, well below the budgeted PKR 8.5 trillion, and is projected to shrink further to PKR 6.5 trillion in FY26.
With international rating agencies upgrading Pakistan’s outlook and the currency holding firm, fiscal managers expect FY26 to bring further discipline in debt growth and stronger economic stability.
