By The South Asia Times

ISLAMABAD -  Pakistan has repaid more than PKR 3.6 trillion in domestic debt ahead of schedule, marking the first time in the country’s history that debt has been retired before maturity on such a large scale, Adviser to the Finance Minister Khurram Schehzad said on Thursday.

In a post on X, Schehzad said the Ministry of Finance has early-retired PKR 3,654 billion in domestic liabilities since late 2024, owed to the market and the State Bank of Pakistan (SBP). The latest repayment of PKR 300 billion was made to the SBP on Thursday.

“This landmark achievement reflects a decisive shift toward fiscal discipline, credibility, and responsible economic management,” Schehzad said.

According to the adviser, early repayments were made in multiple tranches, including PKR 1,000 billion in December 2024, PKR 500 billion in June 2025, PKR 1,160 billion in August 2025, PKR 200 billion in October 2025, PKR 494 billion in December 2025, and PKR 300 billion in January 2026.

He said FY26 (July–January) alone recorded over PKR 2.15 trillion in early retirements, 44% higher than the previous fiscal year.

Schehzad said nearly 44% of SBP-held debt had been retired early, reducing central bank debt from about PKR 5.5 trillion to PKR 3 trillion, including liabilities originally maturing in 2029. Of the total early repayments, 65% comprised SBP debt, 30% treasury bills, and 5% Pakistan Investment Bonds (PIBs).

He added that the improvement was also reflected in overall public debt, which declined from over PKR 80.5 trillion in June 2025 to around PKR 80 trillion by November 2025. Pakistan’s debt-to-GDP ratio, which stood at around 74% in FY22, has fallen to approximately 70%, indicating stronger fiscal fundamentals.

Rejecting per-capita debt comparisons, Schehzad said sustainability indicators such as debt-to-GDP ratios, repayment capacity, interest savings, maturity profiles and rollover risks were more meaningful measures of fiscal health. He noted that several advanced economies carry far higher per-capita debt without facing crisis.

The adviser said early debt retirement has helped reduce refinancing risks, lower borrowing costs, and create greater fiscal space for development and social spending. He said average domestic debt maturity improved from 2.7 years in FY24 to over 4 years, calling it the sharpest single-year improvement on record.

Schehzad also cited substantial savings for taxpayers, estimating PKR 850 billion saved in FY25 and another PKR 800 billion expected in FY26 through debt switches, stable interest rates and continued fiscal discipline.

“This is more than debt repayment — it is a fundamental reset,” he said, adding that Pakistan was moving away from decades of debt-heavy practices toward risk reduction, sustainability and long-term fiscal resilience.