ALULA: Pakistan has made measurable progress toward restoring economic stability through improved debt management and macroeconomic reforms, Finance Minister Muhammad Aurangzeb said while addressing an international forum on sovereign debt challenges.
Speaking at a high-level roundtable on “Addressing Sovereign Debt Vulnerabilities” during the AlUla Conference for Emerging Market Economies 2026, jointly organised by the Government of Saudi Arabia and the International Monetary Fund, Aurangzeb said Pakistan’s recent experience shows that macroeconomic stability is essential for sustainable economic growth.
He noted that global public debt remains at historically high levels, placing pressure on emerging and developing economies through rising debt-servicing costs, tighter financing conditions, and limited fiscal space. He said the key challenge for policymakers is preventing liquidity pressures from turning into solvency crises while protecting growth-enhancing and social spending.
Debt outlook and reforms
Aurangzeb said Pakistan has made initial but meaningful progress in restoring stability through disciplined macroeconomic policies, institutional reforms, and proactive debt management, while acknowledging that the reform process remains ongoing.
He told participants that Pakistan has stayed on track to better manage public debt by extending maturities, reducing servicing costs, and making early repayments. These measures have helped bring the country’s debt-to-GDP ratio down to around 70 percent from about 74 percent over the past three years, while external debt relative to GDP has remained stable.
The finance minister said the government has also recorded interest cost savings and reduced refinancing risks by smoothing debt maturities.
Transparency and revenue measures
Aurangzeb highlighted the institutionalisation of regular and transparent debt sustainability analysis in Pakistan, aligned with IMF and World Bank methodologies. He said the framework now covers domestic and external debt as well as government guarantees, helping improve risk assessment, creditor engagement, and market confidence.
He also pointed to progress in domestic resource mobilisation, noting that Pakistan’s tax-to-GDP ratio has risen to around 12 percent from single-digit levels in previous years, supported by tax reforms, digitisation, and measures to broaden the tax base.
Climate-linked financing efforts
The finance minister said Pakistan has also begun aligning its debt management strategy with climate and development priorities. He cited the issuance of a Green Sukuk and the establishment of a Sovereign Sustainable Financing Framework as steps toward integrating sustainability into public finance planning.
Concluding his remarks, Aurangzeb said addressing sovereign debt vulnerabilities requires early action, strong institutions, transparency, and credible policy frameworks, supported by greater international coordination to help emerging economies manage debt sustainably while maintaining growth.
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