Pakistan’s debt growth falls to 20-year low, external debt hits 9-year low

August 13, 2026 (MLN): Pakistan’s debt growth has slowed to its lowest level in two decades, while external debt exposure and the debt servicing burden have also declined, according to Khurram Schehzad, who shared the latest debt indicators on social media.

According to Khurram Schehzad, Pakistan’s debt grew by 7.7% in FY26, compared with an average growth of around 16% over the past 20 years. The country’s debt-to-GDP ratio declined to 68.3%, from 75% in FY23 and highs of 86%-88% during FY19-FY21.

External debt-to-GDP also fell to 21.5%, marking a nine-year low, compared with around 31% during FY19-FY21.

Meanwhile, State Bank of Pakistan foreign exchange reserves increased more than six-fold from $2.9bn in mid-FY23 to $18.4bn in FY26, improving import coverage from around 2.4 weeks to nearly three months.

The composition of public debt has also shifted toward domestic borrowing, with foreign debt accounting for around 31% of total public debt in FY26, compared with 37%-38% during FY19-FY23. The domestic-to-foreign debt mix now stands at around 69:31, reducing exposure to foreign-currency and exchange-rate risks.

On debt management, Khurram Schehzad noted that Rs4.72tr of debt was retired before maturity, while the average maturity of domestic debt increased from around 2.8 years to more than 3.8 years in FY26, lowering rollover and refinancing risks.

The debt servicing burden has also eased, with interest expense declining from around Rs8.9tr to Rs6.9tr, a reduction of nearly Rs2 trillion in one year. Interest payments as a share of total federal and provincial revenues fell from 61% in FY24 to 35% in FY26.

Pakistan has also recorded three consecutive primary surpluses, while tax revenues grew by 11% in FY26 against debt growth of 7.7%, indicating faster revenue growth relative to debt accumulation.

Khurram Schehzad further highlighted Pakistan’s return to international capital markets after four years through Eurobond and Panda Bond issuances. The Panda Bond attracted strong investor demand, with the issue reportedly around five times oversubscribed.

He also noted that S&P upgraded Pakistan’s sovereign rating to B with a Stable outlook, describing it as the strongest S&P sovereign rating for Pakistan in around nine years.

Khurram Schehzad said the broader shift was showed in lower debt accumulation, reduced external vulnerability, stronger foreign exchange buffers, lower servicing costs and improved market access, pointing toward better debt sustainability and repayment capacity.

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