ISLAMABAD: Pakistan’s debt is growing at its slowest pace in two decades, Finance Adviser Khurram Schehzad said on Wednesday, saying that it was measured at just 7.7 percent in fiscal year 2026 compared to an average growth of 16 percent recorded in the last 20 years.
Pakistan has relied on external and internal loans to bridge gaps in its public finances over the years, as its national currency weakened and its foreign exchange reserves plummeted. Experts point out Pakistan’s chronic trade deficits, high debt-servicing costs, balance-of-payments pressures and a narrow tax base as reasons for its high debt growth.
“Pakistan’s debt growth was recorded at just 7.7 percent in FY26— lowest in 20 years— versus 16 percent average in last 20 years,” Schehzad wrote on social media platform X.
“FY19 recorded highest debt growth at 31 percent.”
The finance official said Pakistan’s debt-to-GDP ratio has declined to 68 percent from 75 percent in FY23. He also said the country’s external debt-to-GDP ratio has fallen to 21.5 percent, which is a 9-year-low, compared to the 31 percent it was recorded from FY19 to FY21.
“Taken together, these are signs of improving debt sustainability, affordability, and repayment capacity,” Schehzad said.
The finance adviser said Pakistan’s central bank has seen its foreign exchange reserves rise by over sixfold in the past 3.5 years, from $2.9 billion in mid FY23 to $18.4 billion in FY26, which equals to three months of import cover.
He said Pakistan’s foreign debt has declined to around 31 percent of the total public debt in FY26, from 37-38 percent in FY19-23.
“Combined with external debt-to-GDP falling to a 9-year low of 21.5 percent, Pakistan’s public debt is now materially less exposed to external risk,” he added.
He said Pakistan’s interest expense has fallen from around Rs8.9 trillion [$32 billion] to $24.8 billion [6.9 trillion], nearly $7.2 billion lower in one year.
“More importantly, interest payments have significantly dropped from 61 percent of total revenues [federal plus provincial] in FY24 to 35 percent in FY26,” he added.
Pakistan’s government says it is aiming to achieve sustainable economic growth under a $7 billion International Monetary Fund program.
Islamabad has undertaken tough economic decisions in the recent past, which include privatizing state-owned enterprises, undertaking reforms in the energy and taxation sectors, as well as incorporating artificial intelligence and digitalization in priority sectors.
