Pakistan Federal Public Expenditure Review - Chapter 3 - Debt Diagnostics, Management and Sustainability

Jul 19, 2026

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Chapter 3 analyzes Pakistan’s public debt by diagnosing its evolution, composition, and key drivers and linking these factors to debt dynamics. It applies a Debt Sustainability Analysis (DSA) with fiscal and external determinants, including a Business-As-Usual pathway and sensitivity tests for the fiscal deficit and macro shocks. The chapter evaluates how debt management choices affect the debt trajectory and Gross Financing Needs, reviews institutional constraints and reforms, and examines the sources, coverage, reporting, and fiscal risk implications of contingent liabilities, concluding with policy recommendations.

LanguageEnglish

CategoryResearch & Report

FormatPDF

Pages46

Reading Time1 h 56 min

Chapter 3: Debt Diagnostics, Management and Sustainability

Introduction

Evolution and Composition of Public Debt

Debt Sustainability Analysis (DSA)

Business-As-Usual Scenario (BAU)

Sensitivity to the Fiscal Deficit and Macro Shocks

Impact of Debt Management Choices on the Debt Trajectory

Institutional Factors affecting Debt Management

Sources and Impacts of Contingent Liabilities

Conclusions and Policy Recommendations

Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized PAKISTAN FEDERAL PUBLIC EXPENDITURE REVIEW Chapter 3. Debt Diagnostics, Management and Sustainability 2023 TABLE OF CONTENTS PREFACE ............................................................................................................ V ABBREVIATIONS............................................................................................... VII CHAPTER 3: DEBT DIAGNOSTICS, MANAGEMENT AND SUSTAINABILITY ............. 1 3.1 Introduction .............................................................................................................................1 3.2 Evolution and Composition of Public Debt .................................................................................2 3.2.1 Debt Composition and Implications............................................................................................. 3 3.2.2 Drivers of Debt ............................................................................................................................. 8 3.3 Debt Sustainability Analysis (DSA) -Fiscal and External Determinants of Pakistan’s Debt Trajectory....................................................................................................................................................10 3.3.1 Business-As-Usual Scenario (BAU) ............................................................................................. 10 3.3.2 Sensitivity of the Debt Level to the Fiscal Deficit....................................................................... 12 3.3.3 Sensitivity of the Debt Level to Macro Shocks ........................................................................... 13 3.4 The Impact of Debt Management Choices on the Debt Trajectory ............................................14 3.4.1 Performance against the Medium-Term Debt Strategy ............................................................ 15 3.4.2 Simulation of different financing strategies on debt levels and GFN ........................................ 16 3.4.3 Counterfactual Analysis of the MTDS ........................................................................................ 19 3.5 Institutional Factors affecting Debt Management ....................................................................22 3.5.1 Fragmentation in Public Debt Management and Recent Reforms ............................................ 22 3.5.2 The Debt Management Performance Assessment (DeMPA) ..................................................... 23 3.6 The Sources and Impacts of Contingent Liabilities ....................................................................24 3.6.1 Coverage, Reporting, and Key Drivers of Contingent Liabilities ................................................ 24 3.6.2 Analyzing Fiscal Risk of Contingent Liabilities and Way Forward .............................................. 26 3.7 Conclusions and Policy Recommendations ..............................................................................28 Annex 3.1: Annex: Debt Sustainability Analysis (DSA) and Medium-term Debt Management Strategy (MTDS) Model..............................................................................................................................31 Annex 3.2: Debt Sustainability Analysis (DSA) Scenarios Tables .....................................................32 REFERENCES...................................................................................................... 38 List of Figures, Tables, and Boxes FIGURES Figure 3.1: Pakistan’s Public and Publicly Guaranteed Debt .........................................................................................2 Figure 3.2: General Government Debt to GDP ..............................................................................................................2 Figure 3.3: Domestic Debt Ser

FAQs

What topics are covered in Chapter 3 of Pakistan’s Federal Public Expenditure Review?

The chapter covers debt diagnostics, debt sustainability analysis, the impact of debt management choices, institutional factors, and contingent liabilities, ending with conclusions and policy recommendations.

How does the chapter assess Pakistan’s debt sustainability?

It uses a Debt Sustainability Analysis (DSA) incorporating fiscal and external determinants, including a Business-As-Usual scenario and sensitivity tests tied to the fiscal deficit and macro shocks.

Why are contingent liabilities important in the chapter’s framework?

The chapter identifies their sources and impacts, reviews coverage and reporting, and analyzes their fiscal risk to outline a forward path for managing these risks.

Jul 19, 2026

Upload by Patrick