Pakistan’s total public debt rose 7.7% to PKR 86.715tn by the end of June 2026, according to the Finance Division’s Annual Debt Review FY2026, released on 30 September. The debt-to-GDP ratio moved in the opposite direction, falling to 68.3% from 70.6% a year earlier. Both figures describe the same year: the rupee stock increased, while debt became smaller relative to the size of the economy.
A lower ratio does not mean a lower debt stock
The distinction is the denominator. The review puts nominal GDP at PKR 126.870tn in FY2026, up 11.3% from PKR 114.039tn the year before. The public-debt stock grew more slowly than nominal GDP, so the ratio declined even as the amount owed increased by PKR 6.198tn. A falling ratio is useful context, but it is not evidence that the government repaid more debt than it borrowed.
The comparison also depends on which debt measure is being used. The review’s headline total is PKR 86.715tn, including PKR 59.441tn in domestic debt and PKR 27.274tn in external debt. Separately, it reports PKR 77.168tn, or 60.8% of GDP, under the Fiscal Responsibility and Debt Limitation Act definition. That statutory measure covers federal and provincial government debt serviced from the Consolidated Fund and debt owed to the IMF, less government deposits with the banking system. The two ratios have different scopes and should not be treated as interchangeable.
Lower interest costs helped the fiscal balance
The Finance Division reports a federal primary surplus of PKR 2.185tn in FY2026, compared with PKR 1.798tn in FY2025. Federal interest expense fell 22% to PKR 6.948tn, while the federal fiscal deficit narrowed to PKR 4.763tn from PKR 7.089tn. These are annual federal fiscal flows; they help explain the debt picture, but they are not measures of the total public-debt stock.
The review also records that external debt made up 31.5% of the total stock at end-June 2026, compared with 32.3% a year earlier. The headline debt ratio and the statutory ratio both improved, but the debt stock itself continued to rise. Future reviews will show whether lower interest costs and primary surpluses can persist as financing needs evolve.
Source: Finance Division, Debt Management Office, Annual Debt Review FY2026, released 30 September 2026. Period: fiscal year ended June 2026. Debt ratios are reproduced using the report’s stated definitions.
