Pakistan’s debt-to-GDP ratio expected to decline to 66.6 per cent by FY2027

ISLAMABAD: Pakistan’s public and publicly guaranteed (PPG) debt-to-GDP ratio is forecasted to decrease to 66.6 per cent by FY2027, a drop from 68.6 per cent in FY2025, according to the latest Debt Sustainability Analysis report from the Finance Division. This declining debt trajectory signals an improvement in the country’s fiscal health.

In tandem with this, real GDP growth is projected to jump from 3.6 per cent in the ongoing financial year to 5.5 per cent by FY2027, according to Mettis Global. This rise is owing to improvements in external account balance and recovery in key sectors of the economy.

Fiscal reforms and a favourable growth-interest rate differential are highlighted as key contributors to the anticipated reduction in the debt-to-GDP ratio. Under the baseline scenario of the report, public debt remains well below the prudent benchmark, reflecting enhanced fiscal management.

Additionally, the Gross Financing Needs (GFN) to GDP ratio is expected to decline from 25.4 per cent in FY2025 to 19.5 per cent by FY2027, indicating moderate risk and a positive outlook for medium-term debt dynamics.

Pakistan’s overall economic outlook has gradually brightened since FY2024, credited to sound policy measures and renewed financial inflows from multilateral and bilateral partners. The successful completion of the IMF’s Stand-By Arrangement (SBA) in April 2024 and the initiation of the Extended Fund Facility (EFF) in early FY2025 have further bolstered confidence among economic stakeholders spurring activity.

The government’s focus on revitalising the economy includes targeted reforms in agriculture, industry, and services, paired with broader governance improvements. These efforts are part of a broader strategy to shift towards investment and export-led growth.

The Special Investment Facilitation Council (SIFC) is at centre of this push attracting private and foreign direct investment particularly in sectors such as agriculture, minerals, information technology, telecom, and energy.

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