For years, Pakistan’s public finances seemed trapped in a punishing cycle.
Borrow to survive. Pay ruinous interest. Borrow again.
Now, by several significant measures, that cycle appears to be breaking.
Pakistan’s central government debt grew at just 5 percent in the current fiscal year.
That is the slowest pace recorded in at least 15 years.
It is also a sharp retreat from the 23 percent growth posted as recently as fiscal year 2023, according to data from the State Bank of Pakistan.
Officials say the deceleration reflects a deliberate and sustained effort to restructure how the country borrows — and at what cost.
The numbers have been scrutinized by economists and international creditors alike.
They suggest a country that has spent the better part of three years rewiring its fiscal architecture from the ground up.
At the center of the debate is a figure that has circulated widely on Pakistani social media.
That figure claims the country’s debt has ballooned to between 97 and 100 trillion rupees.
Officials push back sharply on that characterization.
That figure, they say, conflates central government debt — currently sitting at approximately 81.9 trillion rupees — with a broader accounting category that includes private sector liabilities.
The distinction matters enormously.
Sovereign debt sustainability is not assessed by headlines or aggregate totals. It is assessed by how much a country owes relative to the size of its economy.
On that measure, Pakistan is moving in the right direction.
The debt-to-GDP ratio has declined from roughly 76 percent in fiscal year 2019–20 to approximately 68 percent in fiscal year 2026.
More notably, external debt — the portion denominated in foreign currencies and most susceptible to exchange rate shocks — has fallen from around 28 percent of GDP to roughly 21 percent over the same period.
The government has also restructured the terms on which it borrows.
Average domestic debt maturity has extended from 2.8 years to 3.8 years.
That change buys breathing room by spreading repayment obligations further into the future.
It also reduces what economists call refinancing risk — the danger of being caught unable to roll over short-term debt in a hostile market.
Pakistan also recently issued a foreign bond at what officials described as the lowest rate in the country’s history — at 2.5 percent.
That development signals renewed, if cautious, confidence among international investors.
Separately, the government has retired 4.7 trillion rupees in expensive existing debt.
This includes 2.47 trillion rupees owed to the central bank.
It also includes 2.3 trillion rupees of market debt bought back before maturity.
Officials say early debt retirement at this scale is without precedent in Pakistan’s history.
Perhaps the most consequential shift for ordinary Pakistanis is the change in how much of the federal budget is consumed by interest payments alone.
At their peak in fiscal year 2023, those payments absorbed roughly 64 cents of every rupee of gross federal revenue.
That left almost nothing for roads, schools, hospitals, or public services.
That ratio has since fallen to approximately 40 percent.
This has freed up fiscal space that analysts say the government is beginning to deploy toward development spending.
In absolute terms, interest expense has declined from approximately 8.89 trillion rupees to an estimated 6.94 trillion rupees in the current fiscal year.
That is a reduction of nearly two trillion rupees — or about 22 percent — in a single year.
Beyond the debt numbers, Pakistan’s external position has undergone a notable reversal.
Foreign exchange reserves once covered less than two weeks of imports.
That level left the country acutely vulnerable to external shocks and import disruptions.
Reserve cover has since risen to nearly three months.
Officials also emphasize that a growing share of the accumulation has come from non-debt sources — improving what economists call the quality of reserves.
The current account has also swung from chronic deficit to surplus.
In fiscal year 2022, Pakistan recorded a current account deficit of 17.4 billion dollars — the second largest in its history.
The country has now posted two consecutive years of current account surpluses.
That turnaround substantially reduces its dependence on external financing.
Three consecutive years of primary fiscal surpluses have further slowed the pace at which new debt is being added.
A primary surplus means the government is now collecting more revenue than it spends — before accounting for interest payments.
What has changed, supporters of the current trajectory argue, is the direction of travel — and the momentum behind it.
“Every government borrows. Every government repays,” one official framing of the data put it.
The real question is whether debt is becoming more sustainable, more affordable, and less risky.
By the metrics Pakistan is now posting, the answer — at least for this fiscal year — appears to be yes.
By Khurram Shahzad, Advisor to the Finance Minister, vide X Account Post
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