Pakistan retires Rs2,600bn debt in under year, sets fiscal record

ISLAMABAD: Pakistan has repaid Rs2,600 billion ($9.2 billion) debt to central and commercial banks in under a year, the finance adviser of the country said on Sunday, calling it a “record achievement” with growing fiscal discipline.

The Pakistani finance ministry retired Rs500 billion early into the central bank on June 30, and the nation’s Debt Management Office made another repayment of Rs1,133 billion on August 29, Finance Minister Muhammad Aurangzeb’s adviser, Khurram Schehzad, revealed.

This took the State Bank of Pakistan (SBP) early retirement debt to a total of Rs1,633 billion. The finance ministry had retired domestic commercial market debt worth Rs1,000 billion earlier this fiscal year, the first such advance debt retirement operation in the history of Pakistan.

“Adding both the central bank and commercial segments, the entire early debt retirement within less than one year now aggregates to over PKR 2,600 billion, a record size and decisive move in the fiscal history of the country,” Schehzad commented on X.

Pakistan’s cumulative domestic debt was Rs51,518 billion as of March 2025, based on the central bank statistics.

Schehzad declared the government has reduced the SBP debt by almost 30 percent to Rs3.8 trillion from Rs5.5 trillion, many years in advance of its maturity in 2029.

“This move is a decisive turn away from old debt-infused habits, when a reliance on borrowing crowded out fiscal space and added risks,” he explained.

The improvement comes as the South Asian nation navigates a long, bumpy road to economic revival under a $7 billion International Monetary Fund (IMF) program. Pakistan has ridden boom-bust cycles for decades and has taken 22 IMF bailouts since 1958.

The finance adviser added that the enhanced fiscal discipline has lightened the country’s 2029 refinancing requirement, reduced rollover risks, and opened up more space for development expenditure.

The average maturity of local debt has increased to 3.8 years from 2.7 in FY24 — history’s greatest single-year improvement, and ahead of the IMF target,” he said.

“With declining rates and diligent, early repayment, the government has already recorded more than PKR +800 billion in taxpayer savings (FY25).”

Schehzad told the move was a part of “responsible, forward-looking financial governance.

By turning the previous cycle of unshackled borrowing on its head and making repayment the center of fiscal management, Pakistan is rebuilding credibility, enhancing resilience, and constructing a more sustainable tomorrow,” he said.