Pakistan makes record repayment of Rs3.6tr in domestic debt

January 30, 2026 (MLN): Pakistan has repaid more than Rs3.65tr in domestic debt ahead of maturity since late 2024, a shift in how the government is managing its liabilities.

The latest early repayment of Rs300bn was made to the State Bank of Pakistan (SBP) this week.

The early retirements have been carried out over a period of about 14 months and include repayments to both the domestic market and the central bank.

The Ministry of Finance retired Rs1tr in December 2024, followed by Rs500bn in June 2025, Rs1.16tr in August 2025, Rs200bn in October 2025, Rs494bn in December 2025, and Rs300bn in January 2026. In FY26 (July–January) alone, early repayments exceeded Rs2.15tr, around 44% higher than the total recorded in FY25.

According to Khurram Schehzad, who shared details on his X account, the early repayment drive has significantly reduced Pakistan’s reliance on central bank borrowing.

Nearly 44% of debt owed to the SBP has been retired ahead of schedule, bringing SBP-held debt down from around Rs5.5tr to approximately Rs3tr. Some of the retired debt was originally scheduled to mature in 2029.

A breakdown of the repayments shows that about 65% went toward SBP debt, 30% toward Treasury Bills, and 5% toward Pakistan Investment Bonds (PIBs).

The impact is also visible in broader public debt indicators. Total public debt declined from over Rs80.5tr in June 2025 to around Rs80tr by November 2025, while the debt-to-GDP ratio has eased from roughly 74% in FY22 to about 70%, which reflects improved fiscal sustainability.

Debt sustainability indicators such as debt-to-GDP, repayment capacity, maturity profile, and interest burden provide a clearer picture of fiscal health than per-capita debt figures, which can be misleading when viewed in isolation.

The early retirement strategy has also contributed to a sharp improvement in average domestic debt maturity, which increased from 2.7 years in FY24 to over 4 years, the largest single-year improvement on record. This has reduced refinancing pressure and provided greater predictability in government financing.

Savings came in of more than Rs850bn in FY25 due to lower interest costs and debt switching, with an additional Rs800bn expected in FY26 if the current approach continues.

The move can be described as part of a broader effort to place repayment discipline and risk reduction at the center of fiscal management, shifting away from short-term borrowing and frequent rollovers toward a more sustainable debt profile.

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