Pakistan repays record PKR 2.6 trillion in domestic debt, signals fiscal shift

Pakistan’s Ministry of Finance has retired more than PKR 2.6 trillion in domestic debt so far in the current fiscal year, including a record PKR 1.63 trillion repaid to the State Bank of Pakistan (SBP) in just 59 days.

Officials described the move as a landmark display of fiscal discipline and a step toward sustainable governance. It is the largest reduction of central bank debt in such a short period in Pakistan’s history.

On June 30, 2025, the ministry retired PKR 500 billion in SBP debt. Another PKR 1,133 billion repayment followed on August 29, bringing total early central bank debt retirement to PKR 1.63 trillion.

Separately, the ministry repaid PKR 1 trillion in domestic commercial market debt in the first half of fiscal 2025 — the first such advanced debt retirement operation in the country’s history.

“Over PKR 2.6 trillion of debt has been repaid early — a record achievement in our fiscal history,” Khurram Schezad, special assistant to the finance minister, wrote on X, formerly Twitter, on Sunday. “This is a decisive shift from past borrowing-heavy practices to responsible fiscal management.”

The Finance Ministry said the SBP debt has been cut from PKR 5.5 trillion to PKR 3.8 trillion — an almost 30% reduction well ahead of its 2029 maturity. Officials said the step reduces rollover risks and frees up fiscal space for development spending.

The early repayments have also improved the country’s debt profile. The average maturity of domestic debt has increased to 3.8 years, compared with 2.7 years in fiscal 2024 — the sharpest single-year improvement in history and beyond targets set by the International Monetary Fund.

According to government estimates, the strategy has already saved more than PKR 800 billion in taxpayer funds during fiscal 2025, thanks to lower interest rates and early repayments.

“This is not just about paying off debt — it’s about restoring credibility and building long-term resilience,” Schezad said.

The government says the milestone signals a decisive shift in Pakistan’s public finance management — away from reliance on heavy borrowing and toward a disciplined, forward-looking fiscal strategy.