Pakistan Public Debt Skyrockets as Govt Borrows Rs25.4bn Every Day

Pakistan public debt has soared to an unprecedented Rs80.5 trillion by the end of June, with an alarming daily addition of Rs25.4 billion, breaching statutory limits and raising concerns about the country’s debt sustainability, according to official figures.

The State Bank of Pakistan (SBP) released its debt bulletin for fiscal year 2024-25, which showed that Pakistan public debt rose both in absolute terms and as a percentage of GDP. Gross public debt increased by Rs9.3 trillion, or 13%, compared to the previous year. On average, the government borrowed Rs25.4 billion per day during FY25.

As a share of the economy, debt climbed from 67.8% of GDP to 70.2%, violating the Fiscal Responsibility and Debt Limitation Act, which mandates annual reductions of 0.5% to 0.75% until reaching 50% by 2032-33. The coalition government has been unable to comply with this requirement.

The swelling debt burden leaves little fiscal room, with nearly half of the budget consumed by interest payments. Despite this, political pressures continue to push for spending on large-scale projects. Including all liabilities, Pakistan’s total debt rose to Rs94.2 trillion by June, equivalent to 82.1% of GDP, the SBP reported.

Domestic and External Debt Surge Amid Rising Fiscal Pressures

The central bank highlighted that debt surged primarily due to fiscal deficit financing, with interest costs playing a major role. Domestic debt jumped from Rs47.2 trillion to Rs54.5 trillion in one year, a 15.5% rise, while external debt increased by Rs1.7 trillion to Rs23.4 trillion. Although most external loans come from concessional sources, the rising share of short-term debt has increased refinancing risks.

Pakistan’s fiscal outlook remains vulnerable to shocks, particularly with ongoing flood damage affecting the primary balance. A finance ministry report warned that any shift in the primary deficit could push the debt-to-GDP ratio further above the 70% mark.

The SBP also noted that IMF-related debt rose by 13% to Rs2.63 trillion by June, as Pakistan remains under a $7 billion IMF bailout program. Debt servicing costs hit Rs13.2 trillion during the last fiscal year, with Rs9.5 trillion spent on interest alone. In dollar terms, Pakistan’s external debt and liabilities reached $135 billion, with an addition of $4 billion over the year.

The SBP cautioned that Pakistan public debt remains unsustainable, with financing needs between 20% and 23% of GDP, well above the 15% threshold considered manageable for developing economies.