Pakistan achieves early retirement of Rs1.5trn public debt in FY25

KARACHI: In a significant economic achievement, the government of Pakistan has demonstrated its firm commitment to fiscal discipline and long-term stability by retiring Rs 1.5 trillion in public debt ahead of schedule in FY25.

This substantial early repayment has contributed to a notable improvement in Pakistan’s fiscal indicators, bringing the debt-to-GDP ratio down from 75 percent in FY23 to 69 percent in FY25.

“In another bold and unprecedented step toward fiscal responsibility, the Ministry of Finance, Government of Pakistan, has successfully retired Rs 500 billion in debt owed to the State Bank of Pakistan (SBP- a full four years ahead of its scheduled maturity in 2029,” Khurram Schehzad Advisor to Finance Minister revealed on social platform X.

Public debt recorded at Rs76,007bn by end-March

This early retirement of central bank debt, executed by the Debt Management Office (DMO), marks a major breakthrough in Pakistan’s debt management strategy. “Early debt retirement while converting shorter-tenure with longer-tenure debt, significantly reduces concentration risk, lowers future liabilities, and strengthens the country’s macroeconomic foundations by curbing reliance on borrowing,” he added.

More importantly, he said that it reflects the government’s strong commitment to proactive, disciplined, and forward-looking financial governance.

This latest achievement builds on an earlier milestone- the successful buyback of Rs 1 trillion in market debt completed by December 2024- the first such operation in Pakistan’s history. Combined, these two strategic actions amount to the early retirement of R 1.5 trillion in public debt in FY25, sending a strong signal of economic confidence and reform.

In a historical move, with improved liquidity position the federal government conducted the first buyback auction of government securities during the first half of last fiscal year to reduce the debt burden. The Rs 3 trillion profit of SBP, transferred to the federal government, has eased the financial burden, and make cushion to retired the public debt, he said.

He mentioned that with these early retirements of debt, Pakistan’s debt-to-GDP ratio declined by 6 percent in the last two years from 75 percent in FY23 to 69 percent in FY25. In addition, it has extended the average time to maturity (ATM) of public debt from 2.70 to around 3.75 years. These early payments have also lowered refinancing risks and freeing up fiscal space for development priorities.

Moreover, by capitalising on the sharp decline in interest rates- combined with disciplined borrowing, timely repayments, and strategic refinancing- the government has achieved an extraordinary Rs 830 billion in interest cost savings in FY25, Schehzad informed. “This is more than just debt reduction; it is decisive, forward-looking economic management, aimed at building a resilient, credible, and fiscally sustainable Pakistan.”

Copyright Business Recorder, 2025