ISLAMABAD: The Finance Ministry informed the National Assembly that Pakistan’s total liquidated reserves stood at $21.407 billion, comprising $16.212 billion held as net reserves with the State Bank of Pakistan and $5.194 billion of net reserves with commercial banks as of February 2026.
Presenting details of external debt, the Finance Ministry stated that by the end of December 2025, Pakistan’s total debt and liabilities were $138 billion, compared to $130 billion in December 2024, reflecting an increase of 7.2 percent. Government external debt in December 2025 stood at $82.7 billion, up from $78.1 billion in December 2024, showing an increase of 4.6 percent. Meanwhile, government domestic debt was Rs 55,363 billion in December 2025, compared to Rs 49,883 billion in December 2024, marking an increase of Rs 5,480 billion. As per the Annual Budget Statement FY26, an amount of Rs8,207 billion was earmarked for debt servicing, approximately 46.7 percent of the total budgeted expenditure of Rs 17,573 billion. While a higher allocation for debt servicing reduces fiscal resources available for development expenditure, the government has adopted strategic initiatives to rationalise debt servicing to manageable levels. The actual expenditure for the first half of FY26 under debt servicing was Rs3,564 billion, representing 43 percent of the budgeted amount, compared to Rs5,142 billion for the same period last year, a reduction of Rs1,578 billion, or almost 30 percent year-on-year.
The Government of Pakistan is undertaking several measures to strengthen financial stability, including broadening the tax base, improving tax compliance through digitisation, rationalising subsidies, and rightsizing the federal government. Financial sector oversight has been enhanced through SOE reforms and privatisation. With the aim of augmenting the country’s foreign exchange reserves, the government and the SBP are tapping all available and potential sources of inflows.
The SBP is following a prudent monetary policy stance, considering inflation and the external account position, which has helped contain inflation and improve the country’s external account. Taking advantage of improvements in the balance of payments, the SBP has boosted foreign exchange reserves through purchases of US dollars from the interbank market.
Pakistan has negotiated EFF and RSF programmes with the IMF, under which about $3.3 billion has been disbursed so far, and the government is currently in the process of the third review, the completion of which will further augment reserves. In addition, budget estimates for FY26 include foreign exchange inflows from various bilateral and multilateral sources, which are expected to improve liquidity and support the build-up of foreign exchange reserves.
For effective debt management, the government has improved the maturity profile of domestic debt to reduce refinancing risk and reliance on short-term treasury bills. The overall average time to maturity of domestic debt government securities has increased from 2.8 years in June 2024 to 3.9 years as of December 2025, reflecting an improved maturity profile. As part of its strategic Liability Management Operations, the government continued debt buyback and retirement operations amounting to Rs 1,784 billion, including the retirement of approximately Rs 1,662 billion of SBP floating-rate debt and Rs 122 billion of market-held debt. This initiative optimised overall fund utilisation, reduced concentration risk, and positively influenced both short-term and long-term borrowing costs for the government.
There has also been a gradual shift from floating-rate to fixed-rate instruments to reduce interest rate risk, including the introduction of long-term zero-coupon bonds to reduce near-term interest expenses. The share of external debt as a percentage of total public debt has declined from a high of 38 percent in FY23 to 32 percent as of December 2025, well below the 40 percent threshold outlined in the Medium-Term Debt Management Strategy.
In addition to these prudent debt management strategies, the government is pursuing fiscal consolidation measures to maintain a primary surplus and further strengthen Pakistan’s overall financial stability.
