Pakistan’s Central Government Debt Falls by Rs. 430 Billion, Now at Rs. 77.46 Trillion

Pakistan’s central government debt has declined by Rs. 430 billion, reaching Rs. 77.46 trillion during the first two months of fiscal year 2026, according to the latest data released by the State Bank of Pakistan. This rare month-on-month drop offers a positive signal, even as the overall debt level remains 10.1% higher compared to the same period last year.

Domestic debt decreased by 0.73% to Rs. 54.1 trillion between July and August, though it remains 11.9% higher year-on-year. On a monthly basis, domestic obligations recorded a notable 1.7% contraction. Meanwhile, external debt dipped slightly by 0.13%, settling at Rs. 23.4 trillion, up 6.2% from a year earlier and 0.6% month-on-month, reflecting minimal new borrowing and the effects of currency realignments.

The government’s early repayment of Rs. 2.6 trillion to the central bank and domestic commercial banks has helped reduce rollover and refinancing risks. In addition, the State Bank of Pakistan transferred a budgeted profit of Rs. 2.4 trillion to the national treasury, further enhancing the fiscal outlook.

Pakistan also fulfilled its $500 million Eurobond repayment on schedule, a development that has contributed to a sharp decline in the country’s sovereign default risk. According to Khurram Schehzad, adviser to the finance minister, Pakistan now ranks as the second-best emerging market performer in terms of risk reduction, trailing only Turkiye.

Bloomberg-reported data from Credit Default Swaps indicates a 2,200 basis point drop in Pakistan’s default probability over the past 15 months. Among emerging markets, Pakistan stands out as the only country showing uninterrupted quarterly improvement in risk metrics, signaling a stronger macroeconomic