The government has unveiled its Medium-Term Debt Management Strategy (MTDS) for 2026–28, setting a target to reduce the debt-to-GDP ratio to 61.5% by the fiscal year 2028.
Key Debt Targets
- Debt-to-GDP ratio: 66% (FY25) → 64% (FY26) → 61.5% (FY28)
- External debt: 18% of GDP currently → 17.9% (FY28)
- Interest payments: 6.3% of GDP (FY25) → 5.4% (FY26) → 4.9% (FY28)
- Domestic debt maturity period: 3 years 8 months → 4.6 years by FY28
- External debt maturity period: Currently 6 years 1 month; planned extension under IMF guidelines
- Shariah-compliant debt instruments: Increase from 13% to 20% of total portfolio
Fiscal & Economic Outlook
- Inflation forecasts: 7.5% (FY25) → 6.8% (FY26) → 6.5% (FY28)
- GDP growth: 4.2% (FY25) → 5.1% (FY26) → 5.7% (FY28)
- Primary surplus: 1.3% of GDP (FY25) → 1% (FY26 onward)
- Fiscal deficit: 5.0% (FY25) → 4.5% (FY26) → 3.9% (FY28)
Debt Position (as of FY25)
- Total debt: Rs78.7 trillion (~$278 billion), 68.6% of GDP
- Domestic debt: Rs53.5 trillion
- External debt: Rs25.2 trillion
Challenges & Commitments
The Finance Ministry acknowledged difficulties due to high gross financing needs and past challenges in securing external funds. The MTDS prioritizes lengthening debt maturities and diversifying instruments, while ensuring compliance with IMF conditions.
The strategy will be presented during upcoming economic review negotiations, with an implementation report also submitted to the IMF.
