AlUla, Kingdom of Saudi Arabia: Federal Minister for Finance and Revenue Senator Muhammad Aurangzeb on Sunday said Pakistan has made steady progress in improving its debt outlook, citing disciplined macroeconomic management and institutional reforms, while acknowledging that the reform process is still underway.
The finance minister was speaking at a high-level roundtable on “Addressing Sovereign Debt Vulnerabilities” during the AlUla Conference for Emerging Market Economies 2026, jointly hosted by the Government of Saudi Arabia and the International Monetary Fund.
In his remarks, Senator Aurangzeb noted that global public debt remains at record levels, creating sustained pressure on emerging and developing economies due to high debt servicing costs, tighter financing conditions, and limited fiscal space. He stressed that the key policy challenge lies not only in managing debt volumes but also in preventing liquidity stress from turning into solvency crises, while protecting growth-oriented and social spending.
Referring to comments by Saudi Arabia’s Minister of Finance, H.E. Mohammed AlJadaan, the finance minister said that macroeconomic stability should be viewed as a foundation for sustainable growth rather than a constraint. He added that Pakistan’s recent economic experience strongly supports this perspective.
The minister said Pakistan has taken initial yet meaningful steps toward restoring macroeconomic stability through prudent policies, institutional strengthening, and proactive debt management. He noted that these measures have helped contain public debt, extend maturities, reduce servicing costs, and enable early debt repayments.
As a result, Pakistan’s debt-to-GDP ratio has declined to around 70 percent from approximately 74 percent over the past three years, while the external debt-to-GDP ratio has remained stable. He added that these efforts have also delivered interest cost savings, smoother debt maturities, and lower refinancing risks.
Senator Aurangzeb further highlighted the institutionalization of regular and transparent Debt Sustainability Analysis in Pakistan, aligned with IMF and World Bank methodologies and covering domestic and external debt as well as government guarantees. He said this approach has strengthened risk assessment, improved engagement with creditors, and boosted market confidence, in line with the objectives of the G20 Common Framework.
He also pointed to progress in domestic resource mobilization, noting that Pakistan’s tax-to-GDP ratio has increased to around 12 percent from single-digit levels in previous years, supported by tax reforms, digitization, and efforts to broaden the tax base.
In addition, the finance minister underscored Pakistan’s initiatives to align debt management with climate and development goals, including the issuance of a Green Sukuk and the establishment of a Sovereign Sustainable Financing Framework.
Concluding his address, Senator Aurangzeb emphasized that effectively addressing sovereign debt vulnerabilities requires early action, strong institutions, transparency, and credible policy frameworks, alongside enhanced global coordination. He said stronger creditor cooperation, greater use of liability management operations, and the integration of climate resilience into debt frameworks would be critical for emerging economies to manage debt sustainably while safeguarding growth and development priorities.
