Pakistan's debt-to-GDP ratio drops to lowest level since 2018

Pakistan's debt-to-GDP ratio has fallen to 65.7% as of September 2024, its lowest level since June 2018, according to the State Bank of Pakistan (SBP).

The domestic debt-to-GDP ratio stands at 43.1%, while the external debt-to-GDP ratio is at 22.7%, an analyst at Arif Habib Limited noted.

The central government's debt decreased by 1.1%, dropping to PKR 69.6 trillion in September from PKR 70.4 trillion in August. Domestic debt fell by 1.7% to PKR 47.54 trillion, compared to PKR 48.34 trillion in August. A year earlier, in September 2023, the government's debt was PKR 39.7 trillion.

External debt remained stable at PKR 22 trillion but decreased by 2.5% compared to September last year.

The SBP's State of Economy report attributes the decline in public debt to fiscal consolidation and substantial revaluation gains due to exchange rate appreciation. The appreciation of the US dollar against major currencies and the strengthening of the Pakistani rupee contributed to this reduction in external debt.

The domestic debt also saw a decline in terms of GDP.

Despite these improvements, the lower-than-expected availability of external finance led the government to rely more on banks for its financing needs. The government met its financing requirements mainly through long-term securities, which improved the maturity profile of domestic debt. This reduction in debt is a positive development for Pakistan, reflecting successful fiscal management and economic stabilization efforts.