The total public debt of Pakistan was reduced in the quarter ending September 2025. The government’s early loan repayment, less borrowing, and better finance handling are the contributing factors. This can reduce interest costs and make investors more confident, according to experts.
The quarter ending in September 2025 recorded a public debt reduction of over PKR 1.37 trillion in Pakistan. This is the first quarterly decline in nearly six years. This shows the government has reduced its debt over the past three months. Public debt went down from PKR80.52 trillion in June 2025 to PKR79.15 trillion in September 2025.
How the Debt Fell
The reduction came from multiple steps by the government and the State Bank of Pakistan (SBP):
- Domestic debt fell by PKR1.048 trillion, including PKR692 billion in long-term debt and PKR356 billion in short-term debt.
- External debt fell by PKR236 billion, reaching PKR23.18 trillion.
- The government made early repayments of PKR 2.6 trillion on commercial and central-bank loans, reducing future interest payments.
Analysts say the government used PKR 2.4 trillion of the State Bank’s profit to pay off debt. This cut interest costs and left more money for businesses, which could help the economy grow.
Key Indicators Show Pakistan’s Debt and Economy Improving
- The government still spent more than it earned, but the deficit got smaller. It was PKR7.1 trillion in FY25, compared to PKR7.7 trillion last year.
- After paying interest on debt, the government still had PKR2.7 trillion left, or 2.4% of the country’s GDP, for the second year in a row.
- The average time before the government must repay its total debt increased to 4.5 years, and domestic debt to 3.8 years.
- Pakistan earned more foreign money than it spent in FY25, creating a $2.0 billion surplus. This is the first time in 14 years.
Khurram Shahzad, Adviser to the Finance Minister, said the debt reduction shows “policy credibility and investor confidence” and gives the government room to spend on development and social programs.
Officials noted that part of the external-debt changes came from exchange-rate adjustments, not new borrowing. They emphasize that using debt-to-GDP ratios is a better way to assess sustainability than looking only at rupee totals.
