Pakistan is expecting to save up to Rs500 billion in the current fiscal year 2025-26 on account of lower debt-servicing costs supported by a stable interest-rate environment.
This was stated by Mohsin Mushtaq, Director General (Debt), the Ministry of Finance, while speaking at the Sustainable Development Policy Institute’s (SDPI) Sustainable Development Conference (SDC) here on Wednesday.
Calling public speculation on external debt “counter-productive,” he said Pakistan follows global reporting standards, and sensitive debt discussions must be handled responsibly to avoid market disruption.
Rs8.2trn will be spent on debt servicing
“Pakistan has adopted the most robust and internationally aligned debt-reporting framework in line with International Monetary Fund (IMF) recommendations, ensuring transparency and market confidence”, said DG, adding that the government has adopted a medium-term debt strategy for 2025-28, publishes half-year debt reports, and adheres strictly to the auction calendar to ensure predictability for markets.
He noted that while technical definitions of public debt are debated, determining them ultimately remains Parliament’s prerogative. He also disclosed that a Debt Coordination Committee has been established to improve reconciliation, reporting, and oversight across institutions.
Pakistan’s debt burden has become unsustainable, and the country can no longer continue borrowing unchecked, warned Syed Naveed Qamar, Chairman of the National Assembly’s Standing Committee on Finance and Revenue. He said that the Parliament must assert control over the borrowing process and enforce the much-needed fiscal discipline.
Qamar delivered a blunt assessment of Pakistan’s debt crisis, saying the government’s borrowing behaviour — across successive administrations — has pushed the economy to a breaking point. “Debt has become unsustainable. Debt servicing is rising and eating our fiscal space. Time has come to cut each other’s throats and cut the NFC allocations, because fiscal space simply is not there,” he remarked.
“Debt servicing as part of budgetary expenditure has to be squeezed. We need to renegotiate loans and stop borrowing blindly,” he said. While acknowledging Pakistan’s commitments under the IMF programme, he noted that the government was not proposing to reverse reforms but must look for fiscal breathing room within those constraints.
He stressed that Pakistan’s long-standing policy of placing no restrictions on government borrowing has been disastrous, and Parliament must now step in to exercise oversight. “Our policy has been that there should be no hurdle in borrowing. That mindset must end. The government is the culprit — and all governments are responsible. The check must come from the Parliament.”
Qamar called for a structured process where external borrowing is first scrutinised and approved by Parliament, followed by domestic borrowing oversight. “Borrowing rectification is happening all over the world. We must move toward parliamentary control — starting with external borrowing and then domestic.”
He criticised Pakistan’s tight monetary policy — kept restrictive to curb inflation — arguing that while inflation control is necessary, the policy is eroding fiscal space.
Qamar emphasised that transparency and judicial use of borrowing authority are key to restoring fiscal credibility and economic resilience. “Power to borrow needs to be exercised judicially. Transparency must be the primary objective in managing public debt,” he added.
Pakistan urgently needs an independent debt-reporting authority, similar to the Pakistan Bureau of Statistics (PBS), to consolidate and transparently report the country’s true debt burden, Muzzammil Aslam, Advisor to the Ministry of Finance, Khyber Pakhtunkhwa.
Aslam warned that Pakistan’s actual debt is significantly higher than officially acknowledged due to major obligations not being reflected in the public debt ledger. “A PBS-style independent authority must be established to consolidate and report debt. It should have no vested interests,” he said, adding that fragmented reporting has created serious gaps in fiscal transparency and risk assessment.
Aslam revealed that during July–October 2025, under the National Finance Commission (NFC) revenue-sharing formula, Rs65 billion is still payable to Khyber Pakhtunkhwa alone, while total provincial arrears stand at around Rs300 billion.
He noted that Pakistan’s circular debt — spanning both electricity and gas — combined with pension liabilities and net commitments linked to the Roshan Digital Accounts, was not included in the overall debt. He said Rs12.3 trillion in other obligations are not reflected in the official debt data.
“The outstanding debt is not Rs78 trillion — it is Rs90 trillion when these obligations are included, and that’s besides additional liabilities,” he remarked, warning that the lack of comprehensive disclosure clouds the true fiscal picture.
He stressed that there is currently “no clarity on domestic debt at all”, calling for a unified mechanism to track and reconcile all government-level liabilities, contingent guarantees, and off-balance-sheet financing.
Aslam further argued that the Fiscal Responsibility and Debt Limitation (FRDL) Act must be reviewed and made realistic, saying the present thresholds and rules do not reflect economic ground realities or evolving debt structures.
He cautioned that without reforming debt-management frameworks and improving reporting standards, Pakistan risks policy missteps, weak debt sustainability, and heightened macroeconomic vulnerability.
