Pakistan’s ballooning debt has crossed a historic milestone, with the country owing Rs80.5 trillion by the close of June. Fresh data from the State Bank of Pakistan (SBP) shows the government piled on an average of Rs25.4 billion every single day during the last fiscal year—well above levels considered sustainable.
Breaching Legal Limits
According to the SBP’s annual debt bulletin for FY2024-25, public debt jumped by Rs9.3 trillion compared to the previous year, marking a 13% rise. Debt now accounts for 70.2% of GDP, up from 67.8%, violating the Fiscal Responsibility and Debt Limitation Act. That law requires Pakistan to gradually reduce debt to 50% of GDP by 2032–33, a target that looks increasingly unrealistic.
Nearly half of federal spending is now swallowed up by debt servicing, leaving little room for development or social sector investment. Yet, political pressures continue to drive spending commitments the state can ill afford. Factoring in total liabilities, Pakistan’s obligations reached Rs94.2 trillion—82.1% of GDP.
Domestic vs. External Debt
The burden rose on both domestic and external fronts. Local debt swelled from Rs47.2 trillion to Rs54.5 trillion, a 15.5% increase in just one year. External debt also climbed, adding Rs1.7 trillion to reach Rs23.4 trillion. While most of Pakistan’s foreign loans remain concessional, a growing reliance on short-term borrowing has heightened rollover risks.
SBP figures further revealed that IMF-related obligations increased 13% to Rs2.63 trillion as Islamabad remains tied to a $7 billion bailout program. Overall external debt and liabilities now total $135 billion, up $4 billion in one year.
Cost of Borrowing Spirals
Servicing this mountain of debt is eating into Pakistan’s fiscal space at a dangerous pace. Last year alone, the government paid Rs13.2 trillion on debt, including Rs9.5 trillion in interest. In dollar terms, Pakistan’s repayment commitments leave it heavily exposed to exchange rate pressures and global financial conditions.
The SBP warned that financing needs currently stand at 20–23% of GDP—well above the 15% benchmark considered manageable for emerging economies. With flood recovery costs adding to fiscal pressures and the primary deficit widening, the debt-to-GDP ratio is at risk of climbing even further.
