KARACHI: Pakistan’s public debt recorded a significant decline in the first quarter of the current fiscal year (FY26), dropping by more than Rs 1.2 trillion—a development economists say reflects improved fiscal management and strong profit transfers from the State Bank of Pakistan (SBP).
Fresh data released by the SBP shows that total central government debt fell by Rs 1.283 trillion between July and September 2025. The debt stock, which stood at Rs 77.888 trillion at the end of June 2025, decreased to Rs 76.605 trillion by the close of September.
The sharp reduction was led by domestic debt, which contracted by Rs 1.048 trillion, settling at Rs 53.424 trillion in September 2025. According to analysts, this early downward shift provides welcome relief for the government, particularly by easing interest payment pressures.
They attribute the improvement to stronger debt management strategies and robust profit transfers from the central bank. The SBP posted a remarkable profit of Rs 2.5 trillion in the previous fiscal year, transferring Rs 2.4 trillion to the federal government. This inflow, they noted, has been crucial in easing fiscal strain and reducing reliance on fresh borrowing.
Analysts added that restrained budgetary borrowing—aligned with the government’s fiscal consolidation agenda—has also helped create more room for private sector credit, supporting the prospects of sustainable economic growth.
Breakdown of the domestic debt data shows that long-term debt experienced a sizeable contraction, falling by Rs 692 billion to Rs 44.961 trillion from Rs 45.653 trillion recorded in June 2025. Short-term debt also decreased by Rs 356 billion, dropping to Rs 8.4 trillion from the previous year’s Rs 8.756 trillion.
However, the Naya Pakistan Certificates (NPCs), a government-backed investment instrument primarily marketed to overseas Pakistanis, saw a slight increase in debt—from Rs 62 billion to Rs 63 billion during the period under review.
Pakistan’s external debt, in rupee terms, also saw improvement. It declined by Rs 236 billion, reducing the stock to Rs 23.181 trillion at the end of September 2025 compared with Rs 23.417 trillion in June.
Overall, the first-quarter numbers point to encouraging momentum on the fiscal front, though experts caution that sustained discipline and structural reforms remain essential for long-term debt stability.
