Finance Minister Muhammad Aurangzeb said that Pakistan has reduced its debt-to-GDP ratio from 74% to 70% over the past three years, while managing external debt, lowering interest costs, and smoothing maturities.
The federal minister remarked while participating in a high-level roundtable on “Addressing Sovereign Debt Vulnerabilities” at the AlUla Conference for Emerging Market Economies 2026, jointly organised by the Government of Saudi Arabia and the International Monetary Fund (IMF).
The finance minister highlighted that Pakistan has made initial but meaningful progress in restoring stability through disciplined macroeconomic policies, institutional reforms, and proactive debt management, while acknowledging that the reform journey remains ongoing.
He shared that Pakistan has remained on track to contain and better manage public debt, extending maturities, reducing servicing costs, and undertaking early debt repayments.
These efforts have contributed to a decline in the debt-to-GDP ratio to around 70% from about 74% over the past three years, while our external debt-GDP remained constant, alongside tangible interest cost savings, alongside helping smooth maturities and reduce refinancing risks.
In his intervention, the finance minister noted that global public debt remains at historic highs, placing sustained pressure on emerging and developing economies through elevated debt servicing costs, tighter financing conditions, and constrained fiscal space.
He emphasised that the central policy challenge is not only managing debt stocks, but preventing liquidity pressures from escalating into solvency crises, while safeguarding growth-enhancing and social expenditures.
Aurangzeb drew attention to remarks by H.E. Mohammed AlJadaan, Minister of Finance of Saudi Arabia, who observed that macroeconomic stability is not the enemy of growth, but a necessary foundation for sustainable and durable economic expansion. He noted that Pakistan’s recent experience strongly reinforces this view.
The finance minister also highlighted Pakistan’s institutionalisation of regular and transparent Debt Sustainability Analysis, aligned with IMF-World Bank methodologies, covering domestic and external debt as well as government guarantees. He noted that this shift has strengthened risk identification, improved engagement with creditors, and supported market confidence, in line with the objectives of the G20 Common Framework.
He also highlighted progress in domestic resource mobilisation, noting that Pakistan has raised its tax-to-GDP ratio, which is now moving around 12% from single-digit levels in earlier years, supported by tax reforms, digitisation, and base-broadening measures.
In addition, Aurangzeb drew attention to Pakistan’s efforts to align debt management with climate and development objectives, including the issuance of a Green Sukuk and the establishment of a Sovereign Sustainable Financing Framework.
Concluding his remarks, the finance minister stressed that addressing sovereign debt vulnerabilities requires early action, strong institutions, transparency, and credible policy frameworks, supported by enhanced global coordination.
Strengthening creditor cooperation, expanding the effective use of liability management operations, and integrating climate resilience into debt frameworks, he noted, will be essential to help emerging economies manage debt sustainably while preserving growth and development priorities.
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