Pakistan's debt-to-GDP ratio has fallen to an estimated 68.5% in fiscal year 2025-26 from 75.2% in FY23, while public debt growth during the first 11 months of the current fiscal year slowed to a 15-year low of 5%, according to a federal government spokesperson. The government attributed the improvement in Pakistan's debt profile to fiscal discipline and debt-management measures, including three consecutive years of primary fiscal surpluses from FY24 through FY26.

Debt growth of 5% during the first 11 months of FY26 compares with an average increase of 13.7% between FY11 and FY25. The spokesperson said the highest annual rise during that period was 23%, recorded in FY23. The figures suggest a marked slowdown in the pace at which government liabilities are accumulating, alongside a reduction in debt relative to the size of the economy. The spokesperson said increases in public debt reflected the government's fiscal financing requirements rather than a change in debt-management policy.

A greater reliance on domestic borrowing, he added, had reduced Pakistan's exposure to exchange-rate volatility and external refinancing risks. The government's Medium-Term Debt Management Strategy envisages keeping external borrowing below 40% of total public debt. The current composition is around 69% domestic and 31% external. That structure places more than two-thirds of the public debt burden within the domestic market, limiting the proportion directly exposed to external financing. The government has also sought to broaden the sources from which it borrows rather than depending heavily on a narrower pool of lenders. Investor-diversification measures cited by the spokesperson include JazzCash Treasury Bills, InvestPak, National Savings schemes through the Central Directorate of National Savings and the Roshan Digital Account programme.

Long-tenor and zero-coupon Pakistan Investment Bonds have also been introduced to attract retail and institutional investors. According to the government, longer-tenor PIBs and Government Ijara Sukuk have widened participation by insurance companies and pension funds. The strategy is intended gradually to reduce reliance on commercial banks. The government expects continued fiscal consolidation and a broader investor base to create more room for bank lending to the private sector. Changes in the maturity profile of domestic borrowing are another element of the debt strategy.

Taking advantage of what it described as improved macroeconomic conditions, including declining inflation and lower interest rates, the government has shifted more borrowing towards medium- and long-term PIBs and Sukuk. As a result, the Average Time to Maturity of domestic debt has increased from 2.8 years in June 2024 to around 3.9 years.

A longer maturity profile reduces the frequency with which existing liabilities need to be refinanced, thereby lowering rollover risk. The government also addressed the increased issuance of Market Treasury Bills. It described the move as temporary and attributed it to prevailing market conditions following heightened geopolitical uncertainty and changing expectations for interest rates. Diversification of financing instruments remains a central component of the debt-management strategy. Sukuk are being used alongside conventional government securities to broaden participation and mobilise Shariah-compliant savings. Further changes are planned. The government intends to introduce short-term Sukuk carrying three- and six-month tenors, with retail investors as their primary target.

Such instruments would add another source of government financing while expanding participation in the securities market. The strategy therefore combines several objectives: slowing debt accumulation, extending maturities, limiting external exposure and broadening the pool of investors financing the government. On the figures provided by the spokesperson, the most conspicuous improvement has been in the headline debt burden. Pakistan's debt-to-GDP ratio has declined by 6.7 percentage points from 75.2% in FY23 to an estimated 68.5% in FY26. At the same time, the government has recorded primary fiscal surpluses for three successive years, while debt growth during the first 11 months of FY26 has slowed sharply compared with the longer-term average.

The government expects continued fiscal consolidation and investor diversification to reduce dependence on commercial-bank financing further, leaving greater scope for private-sector credit and supporting sustainable economic growth. For Pakistan's debt management, the test will be whether the recent improvement can be sustained. The government's figures point to slower borrowing growth, a lower debt-to-GDP ratio and longer domestic maturities; its strategy now rests on maintaining fiscal consolidation while continuing to broaden the sources and duration of its financing.