Pakistan is on a stable trajectory to manage its external debt repayments of $25.9 billion for the fiscal year 2025-26, according to Jameel Ahmed, Governor of the State Bank of Pakistan (SBP). Speaking at a recent press briefing, the central bank chief expressed confidence in the country’s financial stability, citing rising foreign exchange reserves and a progressively improving economic environment as key indicators of resilience.
Ahmed highlighted that the SBP’s foreign exchange reserves, which currently stand at $14.5 billion, have grown by $5 billion over the past year. The reserves are projected to increase to $15.5 billion by December 2025, with a further target of reaching $17.5 billion by the end of FY26. Expected inflows from instruments like Euro Bonds and other funding avenues are likely to bolster this projection.
For FY2025-26, Pakistan is scheduled to make $26 billion in external payments, broken down into $22 billion in principal and $4 billion in interest. The SBP governor assured that current and anticipated reserves would be sufficient to comfortably meet these obligations. “There is no indication that the country will face difficulty in repaying external debt during this fiscal cycle,” Ahmed said.
One of the key positive shifts in the debt structure has been a change in loan composition. While the total public debt remains steady at around $100 billion since June 2022, no new external debt has been added in the last three years. Instead, the government has successfully shifted toward acquiring long-term, low-cost multilateral loans, increasing their share from 43% in FY22 to 50% in FY25. This rebalancing has contributed to reduced average interest rates and longer repayment periods, improving Pakistan’s overall debt sustainability.
The revival of investor confidence and a broadly improving macroeconomic landscape are also contributing to Pakistan’s more favorable debt outlook. The SBP governor noted that the country’s sovereign bonds are trading at a premium in global markets, a sign that international investors are acknowledging Pakistan’s fiscal improvements. This trend is expected to facilitate future debt rollovers and fresh loans at more competitive rates.
Additionally, the broader economic recovery is gaining momentum. Ahmed reported a GDP growth rate of 2.7% in FY24, with forecasts for FY25 ranging between 3.25% and 4.25%. Meanwhile, worker remittances are expected to exceed $40 billion, reinforcing the country’s external accounts. Despite anticipated increases in imports, the current account deficit is projected to remain within 0% to 1%, ensuring a relatively balanced external position.
With this multi-pronged strategy—rising reserves, improved loan terms, and enhanced investor confidence—the government appears poised to manage its external liabilities effectively. The outlook for FY2025-26 suggests cautious optimism as the country consolidates gains and continues building fiscal resilience in the face of global economic pressures.