The govt has announced the early retirement of Rs. 1.133 trillion of debt owed to the State Bank of Pakistan (SBP). This repayment is one of the largest in the country’s fiscal history.
The Debt Management Office executed this repayment on August 29, following a previous payment of Rs. 500 billion on June 30. In total, the govt cleared Rs. 1.633 trillion within just 59 days. Over the past year, the total repayments exceed Rs. 2.6 trillion.
According to the Ministry of Finance, the repayments became possible due to record profits by the SBP. High interest rates and a 186 percent increase in federal revenues for FY2024-25 helped generate Rs. 2.5 trillion from the SBP’s surplus profits.
The govt stated that these early repayments signal a strong commitment to fiscal discipline. Nearly 30 percent of the SBP debt, originally maturing in 2029, has been paid off early. This reduced the outstanding SBP debt from Rs. 5.5 trillion to Rs. 3.8 trillion.
Officials said this move improves fiscal space and lowers refinancing risks. The average maturity of domestic debt increased from 2.7 years in FY24 to 3.8 years. This is the sharpest improvement in Pakistan’s history and surpasses IMF goals.
Falling interest rates also helped the govt save nearly Rs. 800 billion, easing the tax burden. The govt’s Medium-Term Debt Management Strategy (MTDMS 2026–28) focuses on issuing longer-term fixed-rate bonds and repaying SBP debt before 2029.
The Ministry of Finance noted that domestic debt interest rates remain high at 15.82 percent compared to 4.4 percent for external debt. Nearly 80 percent of domestic debt will be reset in FY2026, which maintains interest rate risks.
Despite challenges, the govt said early repayments and longer debt maturity have strengthened fiscal stability and credibility.
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