KARACHI: Marking a modest improvement in the country’s overall debt position, Pakistan’s central government debt fell by 1.16 percent in the first four months of the current fiscal year (FY26).
The State Bank of Pakistan (SBP) on Thursday reported that Pakistan’s total debt stocks, including domestic and external, eased to Rs 76.980 trillion by the end of October 2025, down from Rs 77.888 trillion in June 2025, depicting a decline of Rs 908 billion.
The decline in the central government debt was driven by reductions in both external and domestic borrowing. However, in terms of percentage the bulk of the decline came from external debt, which contracted by 1.72 percent.
Debt-to-GDP ratio falls to 26pc: SBP governor
External debt dropped by Rs 413 billion to Rs 23.004 trillion at the end of October 2025. This compares with Rs 23.417 trillion recorded in June 2025, reflecting lower reliance on foreign financing during the period.
On the domestic side, the government has successfully trimmed its debt by 1 percent or Rs 496 billion. Domestic debt stood at Rs 53.976 trillion by October 2025, down from Rs 54.472 trillion in June 2025, as authorities slowed fresh borrowing and retired some existing obligations.
Recently, Governor SBP Jameel Ahmad has revealed that Pakistan’s debt management has improved and overall external debt burden has begun to ease, with the debt-to-GDP ratio falling from 31 percent to 26 percent. Pakistan has not added to its external debt stock since 2022, breaking a long trend of steady annual increases.
This is the first meaningful improvement in the debt during the several years, while previously between 2015 and 2022 Pakistan’s external debt had been rising by an average of USD 6.4 billion every year.
Analysts said the downward trend in the debt is a good indication for the economy and offers some relief for policymakers, though they caution that sustained improvement will require continued fiscal discipline and stronger revenue performance.
The SBP has 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. The transfer of profit has helped to retire some debt as well as improve the debt management.
Copyright Business Recorder, 2025
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