Govt retires Rs1.13tr debt to SBP early to reduce its burden
The government has retired Rs1.133 trillion in debt to the State Bank of
Pakistan (SBP), further reducing its central bank liabilities amid record
profits driven by historically high interest rates.
According to the Ministry of Finance (MoF), the
repayment was executed on August 29, following an earlier Rs500 billion
settlement on June 30. This brings total repayments to Rs1.633 trillion in just
two months and over Rs2.6 trillion within a year.
As a result, government debt to the SBP has declined to Rs3.8tr from Rs5.5tr, while the average maturity of domestic debt has risen to 3.8 years from 2.7 years in FY24 — the sharpest improvement in Pakistan’s history and ahead of IMF benchmarks.
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The MoF said falling interest rates saved the government about Rs800 billion in FY25, easing the burden on taxpayers. It also credited stronger fiscal revenues, driven largely by SBP’s Rs2.5tr surplus profit, for enabling the premature repayments.
The ministry described the move as part of a broader
strategy to restore fiscal credibility and reduce refinancing risks. Under its
Medium-Term Debt Management Strategy (2026–28), the government plans to expand
the issuance of long-term bonds, including zero-coupon instruments, while
gradually retiring SBP-held securities.
Despite the progress, the MoF acknowledged that domestic borrowing remains costly, with an average interest rate of 15.82pc compared to 4.4pc on external debt. Interest payments consumed nearly 6pc of GDP in FY25.
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Looking ahead, nearly 80pc of domestic debt is due for interest rate re-fixing by FY2026, highlighting ongoing exposure to rate volatility despite recent gains in fiscal resilience.
Source:
Dawn