The federal government has made significant strides in improving fiscal discipline, with a 30% reduction in borrowing for budgetary support during the fiscal year 2025 (FY25).Â
Borrowing from both the State Bank of Pakistan (SBP) and scheduled banks dropped to Rs 5.554 trillion in FY25, compared to Rs 7.89 trillion in FY24, marking a decrease of Rs 2.336 trillion.
The majority of the borrowing in FY25 came from scheduled banks, as the IMF had placed restrictions on borrowing from the SBP. In comparison, the federal government borrowed Rs 276.5 billion from the SBP, significantly down from Rs 608.3 billion net retirement in the previous year.
Government borrowing from scheduled banks fell by 38%, decreasing by Rs 3.22 trillion, bringing total borrowing from the domestic banking sector to Rs 5.277 trillion in FY25, compared to Rs 8.498 trillion in FY24.
The reduction in borrowing was largely due to a record Rs 3.4 trillion profit transferred from the SBP to the government’s account, which facilitated fiscal improvements and allowed for the first-ever buyback auction of government securities.
The Ministry of Finance repaid Rs 1.5 trillion in public debt during FY25. Notably, Rs 500 billion of debt owed to the SBP was retired four years ahead of its maturity. This early repayment, along with a buyback of Rs 1 trillion in market debt, helped reduce the debt-to-GDP ratio from 75% in FY23 to 69% in FY25.
Provincial governments also made strides, repaying Rs 532 billion to SBP and scheduled banks in FY25, up from Rs 387.5 billion the previous year. Sindh led with Rs 145 billion in repayments, while Punjab repaid Rs 28.5 billion.Â
Khyber Pakhtunkhwa borrowed Rs 12 billion, and the governments of Azad Jammu and Kashmir (AJK) and Gilgit-Baltistan repaid Rs 15 billion and Rs 7 billion, respectively.