---
title: 'Pakistan Unveils Debt Overhaul Strategy Amid Record Rs 76 Trillion'
url: 'https://thediplomaticinsight.com/pakistan-unveils-debt-overhaul-strategy-amid-record-rs-76-trillion/'
author: 'Rao Zeeshan'
date: '2025-06-16T08:00:20+05:00'
categories:
  - 'Business'
  - 'Economy'
---

# Pakistan Unveils Debt Overhaul Strategy Amid Record Rs 76 Trillion

**ISLAMABAD: **Pakistan’s total public debt swelled to **Rs 76 trillion** by the end of March 2025, but the government says it is actively pursuing structural reforms, strategic liability management, and Shariah-compliant financing to steer the country toward fiscal sustainability.

The figures were revealed in the annual **Economic Survey FY2025**, presented by Finance Minister **Senator Muhammad Aurangzeb** on Monday.

Breaking down the debt profile, domestic debt stood at **Rs 51.5 trillion**, while **external debt reached Rs 24.5 trillion** (approximately **US$ 87 billion**), highlighting a pressing need for prudent debt management amid ongoing economic recovery efforts.

While Pakistan’s public debt remains at historically high levels, the FY2025 Economic Survey reflects a concerted effort to **move toward fiscal consolidation, expand domestic debt instruments**, and reduce reliance on short-term borrowing.

#### **Interest Payments Dominate Expenditure**

Between July and March FY2025, **interest payments on public debt totalled Rs 6.44 trillion**, with a staggering **Rs 5.78 trillion on domestic debt** and **Rs 656 billion on external obligations**.

This underscores the structural challenge Pakistan faces: a growing portion of its revenue is consumed by debt servicing, limiting fiscal space for development and social spending.

#### **Domestic Financing and Market Reforms**

Despite the heavy debt burden, the **entire fiscal deficit was financed domestically**, largely through long-term instruments. In a notable move to reduce reliance on short-term borrowing, the government **retired Rs 2.4 trillion in Treasury Bills**, signalling a shift toward a more stable debt structure.

To **diversify the investor base and deepen the domestic capital market**, the government of Pakistan introduced a **2-year zero-coupon Pakistan Investment Bond (PIB)** and launched a **10-year Sukuk** — the first of its kind — with both fixed and floating rate options.

These instruments supplement the existing **3-year and 5-year Ijara Sukuk**, reflecting growing momentum toward **Shariah-compliant financing**, which now accounts for **Rs 1.6 trillion in issuances**.

Additionally, the government **introduced a 1-month Treasury Bill** to provide liquidity options for institutional investors with short-term cash requirements.

#### **Strategic Liability Management**

In a bid to reduce rollover risk and smoothen debt maturities, the Ministry of Finance conducted **strategic Liability Management Operations**, repurchasing **Rs 1 trillion worth of government securities** under a **Buyback and Exchange Programme**.

The move is seen as an effort to optimize debt servicing costs and restructure the maturity profile.

#### **External Inflows and IMF Support**

Despite limited access to global capital markets and Indian efforts to block Pakistan’s moves to secure loans from international lenders, Pakistan secured **external inflows of US$ 5.1 billion** during the first nine months of FY2025.

These comprised **US$ 2.8 billion from multilateral partners**, **US$ 0.3 billion from bilateral allies**, **US$ 1.5 billion via Naya Pakistan Certificates**, and **US$ 560 million from commercial banks**.

The country also received **US$ 1.03 billion** under the **IMF’s Extended Fund Facility (EFF)**, providing crucial breathing space for external financing and signalling continued engagement with international lenders.

Economists warn that without structural reforms in taxation, state-owned enterprises, and energy subsidies, the debt trajectory may remain unsustainable in the long term.