AI-Summary – News For Tomorrow
Pakistan’s finance ministry defends its debt management strategy, focusing on the debt-to-GDP ratio, aligning with the Debt Limitation Act. Despite a Rs9 trillion increase in government debt in one year, the ministry emphasizes the importance of viewing debt relative to the economy’s size, not absolute figures. They highlight a decrease in the fiscal deficit, a historic primary surplus, and a below-average growth in total debt stock. Prudent fiscal management has led to a current account surplus and an improved average time to maturity for public debt. The ministry emphasizes its commitment to macroeconomic stability and responsible fiscal management.
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It asserted that it continued to centre its debt management strategy on aligning public debt-to-GDP ratio to the Debt Limitation Act, which provides for the reduction of federal fiscal deficit and debt-to-GDP ratio to a prudent level by effective public debt management. Moreover, the strategy considered “minimising refinancing and rollover risks while generating interest savings to support sustainable public finances”, the ministry said.
According to latest data from the State Bank of Pakistan (SBP), the country’s total government debt has increased by Rs9 trillion in just one year up to June 2025, with domestic debt representing the majority of this increase.
A Dawn editorial yesterday said Pakistan’s “debt dynamics continue to paint a difficult fiscal picture”.
However, the finance ministry, “while noting recent commentary about public debt levels”, maintained in its statement that “absolute numbers, which will naturally rise with inflation, are not meaningful indicators of sustainability in isolation. The appropriate measure of sustainability is looking at debt relative to the size of the economy i.e Debt-to-GDP — not absolute rupee amounts”.
The ministry said this approach underscored its “commitment to macroeconomic stability, reduced risk, and responsible fiscal management”.
“Similarly, on the fiscal side, the federal fiscal deficit stood at Rs 7.1tr in FY25, lower than Rs 7.7tr in FY24,” the ministry said, highlighting that Pakistan posted a “historic primary surplus of 2.4pc of GDP, or Rs 2.7tr, for the second consecutive year”.
Consequently, the country’s “total debt stock rose 13pc year-on-year, below the 17pc average growth of the past five years”, it said.
The ministry attributed the record current account surplus of $2bn in FY25 to its “prudent fiscal management.”
The ministry further said that the “public-debt average time to maturity has improved to about 4.5 years in FY25 compared to about 4.0 years last year; within this, domestic debt average time to maturity has also risen to over 3.8 years from about 2.7 years.”
