Q1FY26: Pakistan’s central government debt falls sharply by over Rs 1.2 trillion
- Analysts say early decline in central government debt is a positive sign and should help ease the burden of interest payments
KARACHI: In a major development on the economic front, Pakistan’s central government debt fell sharply by over Rs 1.2 trillion during the first quarter of this fiscal year (FY26), supported by strong profit transfers from the central bank.
According to the State Bank of Pakistan (SBP), the country’s total public debt, including domestic and external obligations, dropped by Rs 1.283 trillion during July to September of FY26. The overall stock stood at Rs 76.605 trillion at the end of September 2025, down from Rs 77.888 trillion at the close of June 2025.
The SBP statistics showed that, during the first quarter of this fiscal year, the bulk of the decline came from domestic debt, which contracted by Rs 1.048 trillion to Rs 53.424 trillion in September 2025.
FD projects decline in public debt
Analysts said the early decline in central government debt is a positive sign and should help ease the burden of interest payments. They noted that the government and the State Bank of Pakistan have managed debt obligations more effectively this year, supported by strong profit transfers from the central bank to the federal government.
In addition, contained net budgetary borrowing with support of ongoing fiscal consolidation, will create space for private sector credit for a steady growth, they added.
Within domestic debt, long-term debt also witnessed a significant decline. Long-term debt reduced by Rs 692 billion, slipping from Rs 45.653 trillion in June 2025 to Rs 44.961 trillion in Sept 2025. Similarly, short-term debt also declined by Rs 356 billion, falling to Rs 8.4 trillion from Rs 8.756 trillion in the corresponding period of last fiscal year.
However, debt under Naya Pakistan Certificate increased from Rs 62 billion to Rs 63 billion in the first quarter of this fiscal year.
Pakistan’s external debt, measured in rupee terms, registered a decline of Rs 236 billion. The stock of external debt stood at Rs 23.181 trillion at the end of September 2025 compared with Rs 23.417 trillion in June 2025.
The SBP earned a strong profit of Rs 2.5 trillion in the last fiscal year, out of which Rs 2.4 trillion was transferred to the federal government. This inflow has helped ease the overall debt burden on the economy.
Copyright Business Recorder, 2025
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