Pakistan on track to manage $25.9 billion external debt with rising forex reserves, says SBP governor

Pakistan is in a strong financial position to handle external debt repayments of $25.9 billion during the fiscal year 2025-26, thanks to rising forex reserves and a promising economic outlook, said Jameel Ahmed, Governor of the State Bank of Pakistan (SBP). 

Speaking at a press conference, Ahmed said that the SBP’s foreign exchange reserves, which closed at $14.5 billion with a $5 billion increase in the past year, are expected to rise to $15.5 billion by December 2025. He set a target to increase the reserves to $17.5 billion by the end of fiscal year 2025-26, with potential inflows from Euro Bonds and other sources likely boosting the reserves further.

The central bank is tasked with settling $26 billion in external debt during FY 2025-26, comprising $22 billion in principal and $4 billion in interest. Ahmed assured that the country’s foreign exchange reserves are more than sufficient to meet the repayment obligations, emphasizing that the government will not face any difficulty in repaying the external debt.

Pakistan’s total public debt in FY25 remained stable at around $100 billion, a figure maintained since June 2022, with no new debt added in the last three years. The government has managed to balance repayments and new debt while changing the composition of acquired loans. 

The share of long-term, low-cost multilateral loans, including those from the World Bank and Asian Development Bank, has increased from 43% in FY22 to 50% in FY25, which is expected to lower interest rates, extend repayment periods, and improve the country’s repayment capacity.

The revival of the national economy, evidenced by growing forex reserves, a current account surplus, declining inflation, and improved global ratings, has boosted Pakistan’s credibility. According to Ahmed, the country’s bonds are now trading at a premium in international markets, which is expected to further strengthen debt management and make it easier to secure new loans at lower rates.

The SBP Governor also noted that Pakistan’s economic growth has picked up in FY24, with a 2.7% increase, and projected GDP growth for the current fiscal year is expected to range between 3.25% and 4.25%. Remittances are forecasted to surpass $40 billion, and the current account deficit is expected to remain between 0% and 1% due to surging imports.