KARACHI: Pakistan’s government total debt stock increased by 7.0 per cent, or Rs4.77 trillion, in the first nine months of the fiscal year 2025, mainly due to higher domestic borrowing to meet budgetary requirements.
The country’s central government debt rose to Rs73.688 trillion at the end of March, up from Rs68.914 trillion as of June, data from the State Bank of Pakistan showed on Monday.The debt increased by 12.7 per cent year-on-year (YoY) and 0.9 per cent month-on-month (MoM) in March.
Public debt levels have been rising in recent years and the increased cost of servicing this debt puts pressure on public revenues. However, the SBP has reduced its benchmark interest rate by 1,100 basis points (bps) since June, which reflects easing inflationary pressures and improving financial conditions.
Saad Hanif, head of research at Ismail Iqbal Securities, said that the rise in public debt is primarily due to the government’s fiscal needs and reliance on borrowing. This increase was mainly driven by domestic debt, which surged 18.6 per cent YoY to Rs51.5 trillion. Within this, long-term debt increased by 25 per cent, particularly permanent debt, which rose 28 per cent YoY.
Domestic debt increased by 9.24 per cent in July-March FY25.“In contrast, short-term debt declined 4.5 per cent YoY, as the government actively reprofiled its debt by conducting buybacks and shifting toward longer-term instruments to reduce rollover risk,” Hanif said.
He said external debt remained largely stable amid limited foreign inflows. “The decline in foreign currency loans under domestic debt also suggests repayments while the shift to longer maturities is a positive for debt sustainability,” he added.
Foreign debt rose to Rs22.2 trillion in March, a 1.0 per cent increase from the previous year. It also grew by 0.7 percent month-on-month (MoM) and increased by 2.0 per cent over nine months.Pakistan’s fiscal performance has seen improvement, recording a budget deficit of 2.4 per cent of gross domestic product, totalling Rs2.97 trillion for the July-March FY25 period. This is an improvement compared with the 3.7 per cent deficit recorded during the same period last year. While tax revenues increased, they still fell short of the targets set by the International Monetary Fund (IMF).
This data on Pakistan’s debt follows a ceasefire agreement between India and Pakistan, which has significantly eased regional tensions. This announcement comes after several weeks of heightened tension following the Pahalgam attack, which had unsettled financial markets.
On Friday, Pakistan secured a vital financial lifeline with the IMF's approval of a $1 billion disbursement as part of the $7 billion loan programme agreed last year. Additionally, the IMF approved a new $1.4 billion loan to Pakistan under its climate resilience fund.
According to SBP’s data, the country’s total debt and liabilities increased to Rs89.834 trillion for the first nine months of FY25, up from Rs81.45 trillion during the same period last year. Interest payments on the total debt surged to Rs6.89 trillion, with domestic debt servicing alone exceeding Rs5.86 trillion, despite a decline in interest rates. This trend indicates a growing fiscal burden. Meanwhile, external debt servicing remained high at Rs2.1 trillion, primarily due to repayments to multilateral lenders and bilateral creditors.
In dollar terms, Pakistan’s outstanding total external debt and liabilities decreased to $130.31 billion as of March 31, 2025, compared with $131.04 billion at the end of June.