Moaaz Manzoor

The historic Rs2.03 trillion debt retirement marks improved fiscal discipline and liquidity. Still, experts emphasize strategic investments to translate this progress into sustainable economic growth.

Speaking with WealthPK, Mahmood Ali Shah Bukhari, CEO of Ktrade Securities Ltd, described this achievement "a historic milestone," emphasizing its far-reaching implications for Pakistan's economy. He explained that the government's decision to avoid budgetary borrowing during this period departs from the past practices, signaling a more substantial commitment to fiscal responsibility. He remarked, "The net retirement of Rs2.03 trillion has reduced fiscal pressure significantly and unlocked a surge of liquidity in the banking sector."

Bukhari added that this liquidity influx, combined with the State Bank of Pakistan's (SBP) monetary easing, has led to a sharp decline in the interest rates. According to him, this presents a rare opportunity for economic revival, enabling businesses and industries to access affordable financing. However, he stressed the importance of channelling this liquidity toward the sectors that drive sustainable growth, such as agriculture, industry, and infrastructure. "The critical question is how to channel this liquidity into productive sectors to create jobs and foster long-term economic resilience," he remarked.

Yaseen Bilal Ahmed, a seasoned banking professional with over 20 years of experience, echoed Bukhari's views, calling debt repayment a "notable shift in fiscal discipline." He attributed this achievement to Rs2.7 trillion in profit inflows from the SBP, which significantly bolstered the government's finances. Ahmed pointed out that this marks a clear departure from the traditional reliance on heavy bank borrowing for budgetary support. "This move is especially significant given that the Federal Board of Revenue (FBR) missed its revenue collection targets during the first five months of FY2024-25," Ahmed noted.

He acknowledged that the government's ability to retire debt despite such challenges demonstrates its resolve to strengthen fiscal management. However, he also highlighted the need to address structural issues, such as revenue generation and economic diversification, to sustain these gains. He proposed leveraging public-private partnerships and incentivizing investment in underserved sectors, which could amplify the impact of this debt repayment.

Both experts concurred that the government must seize this opportunity to implement policies that foster sustainable growth and reduce reliance on external borrowing. The Rs2.03 trillion debt retirement is commendable, showcasing improved fiscal discipline and liquidity management. However, as experts emphasized, the real test translates this financial progress into tangible economic outcomes. Strategic investments and structural reforms are essential to ensure this fiscal milestone becomes a foundation for enduring economic resilience and growth.

Credit: INP-WealthPk