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KARACHI: Pakistan’s domestic debt climbed to Rs73.6 trillion by the end of March 2025, as fiscal deficit financing pushed borrowing levels higher, according to fresh data from the State Bank of Pakistan (SBP).
Statistics released by SBP on Monday reveal a 7 percent increase in total federal government debt during the first nine months (July–March) of the fiscal year 2025 (FY25), rising from Rs68.914 trillion in June 2024 to Rs73.688 trillion by March 2025.
The Rs4.774 trillion jump reflects the government’s continued reliance on borrowing to fill the widening fiscal gap.
The primary contributor to this rise was domestic debt, which surged by Rs4.358 trillion or 9.2 percent, reaching Rs51.518 trillion in March 2025 compared to Rs47.160 trillion in June 2024. This included Rs43.595 trillion in long-term loans and Rs7.86 trillion in short-term borrowings.
External Borrowing Sees Modest Growth
External debt, by contrast, rose by only 2 percent—up Rs416 billion—to reach Rs22.17 trillion. This slower growth was partly attributed to a relatively stable exchange rate, with the Weighted Average Customer Exchange Rate of the US dollar at Rs278.3668 in June 2024 and Rs280.1721 in March 2025.
The continued rise in domestic debt has reignited concerns about Pakistan’s fiscal sustainability and the government’s ability to meet future financing needs without intensifying economic vulnerabilities.
Economists caution that unless substantial reforms are undertaken to increase revenue and curb spending, the government may continue to borrow from both domestic and external sources to bridge funding shortfalls.
While Federal Board of Revenue (FBR) tax revenue recorded a year-on-year growth of 26.3 percent during July–April FY25, it still fell short of the target. The government, in an effort to boost revenue, increased the Petroleum Development Levy (PDL) rates, which is likely to push non-tax revenues higher in the remaining months of FY25.
According to SBP, data from the financing side indicates that overall expenditures remained relatively contained during July–March FY25. As a result, the central bank anticipates the overall fiscal deficit may remain near the FY25 target, although achieving the primary surplus target could be difficult.
In its latest monetary policy statement, SBP stressed the need for structural reforms to stabilize the fiscal sector—specifically by broadening the tax base and restructuring state-owned enterprises (SOEs).
