Govt projects public debt ratio to fall to 70% in FY26, 63% by FY28

The Ministry of Finance has projected Pakistan’s public debt-to-GDP ratio to decline to nearly 70% in the current fiscal year and further to 63.3% by FY28, after recording a 3.6% increase to 74.5% in FY25.

According to the Debt Sustainability Analysis Report 2026–28, total public debt stood at Rs80.52 trillion, or 70.8% of GDP, up from Rs71.24 trillion (67.7%) a year earlier. The ministry noted that domestic borrowing accounted for the major share, reflecting a strategy to reduce exposure to exchange rate volatility and external refinancing risks.

The ministry said the country’s public and publicly guaranteed (PPG) debt remains sustainable in the medium term, supported by fiscal consolidation and macroeconomic stability, though facing moderate risk from gross financing needs (GFN).

The report stated that as of June 2025, total PPG debt stood at Rs84.79 trillion, equivalent to 74.5% of GDP, compared to Rs74.62 trillion or 70.9% in June 2024. The increase was attributed to the rupee’s depreciation against major currencies and high real interest rates amid easing inflation.

In contrast, an improvement in real GDP growth and primary surplus slightly offset the debt ratio. The domestic PPG debt rose to 49.8% of GDP in FY25 from 46.2% in FY24, while external PPG debt remained stable.

Publicly guaranteed debt increased to Rs4.27 trillion in June 2025 from Rs3.38 trillion in June 2024, largely due to the inclusion of commodity operation guarantees as contingent liabilities.

The report forecast that by FY28, total public debt will fall to 60.8% of GDP, and PPG guarantees to 2.5% of GDP from 3.8% in FY25. The ministry said the improvement would stem from prudent fiscal management, debt diversification, and macroeconomic reforms.

It added that stronger exports, remittances, and foreign investment, coupled with stable energy prices, are expected to strengthen reserves and stabilize the exchange rate. Under the baseline scenario, the PPG debt-to-GDP ratio is forecast to decline from 74.5% in FY25 to 63.3% in FY28, while the GFN-to-GDP ratio is expected to fall from 26.1% to 15.6% — slightly above the 15% benchmark.