The Government of Pakistan has made a significant stride in its fiscal management by retiring Rs500 billion worth of loans owed to the State Bank of Pakistan (SBP), a move that comes four years ahead of the original maturity date set for 2029. This early repayment underscores Islamabad’s commitment to strengthening the country’s macroeconomic stability while actively managing public debt risks.
According to an update shared by Khurram Schehzad, Advisor to the Finance Minister, the milestone was achieved through the Ministry of Finance’s Debt Management Office, which executed the early payoff as part of a broader effort to recalibrate Pakistan’s debt portfolio. This decision aligns with the government’s strategy to shift away from shorter-term obligations toward longer-tenure instruments, thereby reducing concentration risks and future fiscal pressures.
This proactive step is more than just a symbolic gesture. It follows on the heels of another major achievement — the historic buyback of Rs1 trillion in market debt completed by December 2024. That operation marked the first large-scale market debt repurchase in Pakistan’s history and set the stage for a new approach to managing sovereign liabilities. Collectively, these actions amount to an early retirement of around Rs1.5 trillion in public debt during FY25 alone.
The impact of these strategic maneuvers is already evident in key economic indicators. Pakistan’s debt-to-GDP ratio, which stood at 75 percent at the close of FY23, has now been trimmed to approximately 69 percent by the end of FY25. This reduction not only signals healthier public finances but also positions the country more favorably in the eyes of international lenders and investors.
Equally important is the extension of the average time to maturity (ATM) on Pakistan’s overall public debt, which has lengthened from 2.70 years to roughly 3.75 years. By lengthening the maturity profile, the government has effectively lowered refinancing risks, creating more breathing room to allocate funds toward development spending and priority social sectors.
A standout outcome of this recalibrated borrowing and repayment strategy has been the dramatic savings on interest costs. Thanks to disciplined debt practices and the substantial decline in domestic interest rates, Pakistan has managed to save nearly Rs830 billion in interest payments during FY25. These savings directly translate into fiscal space that can be redirected to infrastructure, education, healthcare, and other growth-enabling initiatives.
Financial analysts view this early repayment as a strong signal of confidence from Islamabad in its ability to manage public finances prudently. By preemptively reducing high-cost borrowing and rebalancing debt tenors, the government not only mitigates near-term risks but also lays the groundwork for a more resilient economic outlook.
Khurram Schehzad noted that these measures are a testament to Pakistan’s move toward “decisive, future-focused economic management.” In his remarks, he emphasized that the strategy is about more than just cutting down headline debt figures. It reflects a deliberate shift toward building a stable, credible, and fiscally sustainable economy — one better equipped to weather both domestic and global financial shocks.
As Pakistan continues to prioritize proactive debt restructuring and leverage the lower rate environment, observers anticipate further steps that will reinforce these gains. For now, this early repayment stands out as a notable win in Pakistan’s ongoing journey to overhaul its fiscal fundamentals and restore investor and public trust in its long-term economic trajectory.