Pakistan Makes History: Rs 2.6 Trillion Domestic Debt Repaid Ahead of Schedule

According to the Ministry of Finance, the government carried out two major early repayments to the State Bank of Pakistan (SBP) this year: Rs 500 billion on June 30, 2025, and Rs 1,133 billion on August 29, 2025 — totaling Rs 1,633 billion in just 59 days. Additionally, Rs 1,000 billion from commercial market borrowings had already been retired, bringing the total early repayment to Rs 2,600 billion.

Debt in Pakistan is typically rolled over at maturity, but paying such a massive sum early demonstrates improved cash flow management and a stronger fiscal position. The SBP’s domestic debt has now dropped from Rs 5.5 trillion to Rs 3.8 trillion, a nearly 30% reduction, with loans originally due in 2029 repaid four years early.

Lower borrowing costs: Early repayment during falling interest rates is estimated to save Pakistan over Rs 800 billion in the last financial year.

Reduced refinancing risk: The country now faces less pressure to refinance large sums in 2029.

Longer debt maturity: Average repayment time has increased from 2.7 years in 2024 to 3.8 years in 2025 — the sharpest single-year improvement in history, exceeding IMF targets.

Improved financial image: Investors and international lenders may view this as a sign of fiscal discipline, enhancing confidence and attracting future investment.

Pakistan is under a $7 billion IMF program to stabilize its fragile economy. Total debt stood at around Rs 76 trillion by June 2025, including Rs 51.5 trillion in domestic loans and Rs 24.5 trillion in external debt. While the overall debt remains high, early repayments signal stronger fiscal management and may ease financial pressure in the coming years.

Finance Ministry advisors say the government will continue exploring opportunities to repay expensive loans early, reduce reliance on short-term borrowing, and strengthen the financial base. Khurram Schehzad, Advisor to the Finance Ministry, said: “This is a landmark achievement for Pakistan’s financial system. With careful planning, we can save money, reduce risks, and build confidence in our economy.”

In short, Pakistan’s early repayment of Rs 2.6 trillion domestic debt is a historic first, saving billions in interest, lowering financial risks, and strengthening the country’s economic profile.