Pakistan Retires $9.2 Billion Domestic Debt in Less Than One Year: Khurram Schehzad

ISLAMABAD: Pakistan has retired Rs2,600 billion ($9.2 billion) in debt to central and commercial banks in under a year, the country’s finance adviser described it as a “record achievement” amid improving fiscal discipline.

The finance ministry completed an early retirement of Rs500 billion to the State Bank of Pakistan (SBP) on June 30, followed by a further Rs1,133 billion repayment executed by the Debt Management Office on August 29, according to Khurram Schehzad, adviser to Finance Minister Muhammad Aurangzeb.

This brought the total early retirement of SBP debt to Rs1,633 billion. Earlier this fiscal year, the finance ministry also retired Rs1,000 billion of domestic commercial market debt, marking the first such advanced debt retirement operation in Pakistan’s history.

“Including both the central bank and commercial portions, the total early debt retirement in less than one year now comes to over PKR 2,600 billion — an unprecedented scale and decisive action in the country’s fiscal history,” Schehzad said on X.

Pakistan’s total domestic debt stood at Rs51,518 billion in March 2025, according to central bank data. Schehzad added that the government had reduced SBP debt by nearly 30 percent, from Rs5.5 trillion to Rs3.8 trillion, well ahead of its 2029 maturity.

“This action marks a decisive shift from past debt-heavy practices, where reliance on borrowing crowded out fiscal space and increased risks,” he said.

The development comes as Pakistan navigates a challenging economic recovery under a $7 billion International Monetary Fund (IMF) program. The country has historically faced boom-bust cycles and secured 22 IMF bailouts since 1958.

Schehzad highlighted that improved fiscal discipline has eased Pakistan’s 2029 refinancing burden, lowered rollover risks, and created more space for development spending.

“The average maturity of domestic debt has risen to 3.8 years from 2.7 in FY24 — the sharpest single-year improvement in history, and well ahead of the IMF target,” he said.

He added that falling rates combined with disciplined early repayments have already generated over PKR 800 billion in taxpayer savings in FY25.

Schehzad emphasized that the initiative is part of “responsible, forward-looking financial governance.”

“By reversing the old cycle of unchecked borrowing and putting repayment at the center of fiscal management, Pakistan is restoring credibility, strengthening resilience, and building a more sustainable future,” he concluded.