Alarm as public debt surges to Rs76tr

ISLAMABAD: Pakistan’s public debt has exploded to a staggering Rs76.01 trillion ($269 billion) as of March 2025—an almost four-and-a-half-fold increase since 2015—underscoring the nation’s chronic fiscal imbalances and decades of political misgovernance. The country’s debt now equals 66.27 per cent of GDP, breaching statutory limits set under the Fiscal Responsibility and Debt Limitation Act (FRDLA), Pakistan Economic Survey 2024-25 revealed.

Successive governments—from General Pervez Musharraf’s military regime to the incumbent government—have turned to borrowing as a policy crutch. The result is a 337 per cent increase in public debt over the past decade and an even more staggering 994 per cent jump since 2008. Every Pakistani, including newborns, now bears a debt burden of Rs277,462.

The figures, unveiled in the Pakistan Economic Survey 2024-25 on Monday, lay bare a grim reality, the country’s addiction to debt is worsening, not stabilizing. Pakistan’s total population is 241.5 million, and its GDP at market prices is Rs114.69 trillion ($411 billion). In 2001, Pakistan’s total public debt stood at just Rs3.68 trillion. By the time Musharraf exited in 2008, it had climbed to Rs6.13 trillion. The PPP government under President Zardari more than doubled it to Rs14.29 trillion by 2013. Under Nawaz Sharif’s PML-N (2013–2018), debt ballooned again to Rs24.95 trillion—adding over Rs10 trillion more. During its 44-month rule (Aug 2018–Mar 2022), Imran Khan’s PTI government added over Rs19.4 trillion to public debt, pushing the total to Rs44.37 trillion. Including post-ouster spillovers, the figure exceeds Rs22 trillion—marking one of the fastest debt accumulations in Pakistan’s history. Despite rhetoric of austerity, PTI’s tenure saw heavy domestic borrowing, currency depreciation, and increased refinancing risks, amplifying fiscal stress. But another rapid accumulation came since April 2022, the government has added a jaw-dropping Rs31.64 trillion in just three years. As of March 2025, domestic debt stood at Rs51.52 trillion while external debt hit Rs24.49 trillion ($87.4 billion). Servicing this colossal burden is draining government finances. In the first nine months of FY2025, interest payments totaled Rs6.44 trillion—66 per cent of the Rs9.78 trillion budgeted for the year. Of that, Rs5.78 trillion went to domestic debt, and Rs656 billion to external.

The Ministry of Finance claims improved cash-flow planning and longer-term debt instruments have helped manage in a relative short-term risks, but the underlying trajectory remains deeply concerning.

During July-March FY2025, Pakistan received $5.07 billion in gross external disbursements—$2.8 billion from multilaterals, $2.01 billion from commercial/other lenders, and $258 million from bilateral partners. No global bonds were issued during this period, signaling limited access to capital markets. Whereas, outflows repayments totaled $5.636 billion, with multilateral creditors receiving the largest portion ($2.828 billion), followed by bilateral creditors ($1.565 billion), and commercial/other sources ($1.243 billion).

Meanwhile, Pakistan witnessed a growth of 6.7 percent in public debt during the first nine months of FY2025 to Rs76.007 trillion with domestic debt of Rs51.518 trillion and external debt at Rs24.489 trillion. The government, however, spent Rs6.439 trillion in the head of debt servicing during July-March period, says the Economic Survey 2024-25. “This was lower as compared to the growth of 7.4 percent in the same period of the preceding year, mainly due to increased primary surplus. The main factors behind the increase in total public debt stock during the first nine months of the ongoing fiscal year.”

During the first nine months of the outgoing fiscal year, total markup expenditure amounted to Rs6,439 billion, representing 66 percent of the full-year budget estimate of Rs9,775 billion. The majority of this expenditure was on domestic debt, which accounted for Rs5,783 billion or 66 percent of the annual allocation of Rs8,736 billion, whereas interest payments on external debt reached Rs656 billion, equivalent to 63 percent of the budgeted Rs1,039 billion.

Within the domestic debt portfolio, the government primarily relied on long-term instruments such as Pakistan Investment Bonds (PIBs) and Sukuk (Islamic Bonds) to finance the fiscal deficit and meet debt repayment obligations. This strategic shift enabled the retirement of Treasury Bills (T-bills) amounting to Rs2.4 trillion, reducing the volume of short-term securities and improving the debt maturity profile

To cater to investor demands, the government also introduced a 2-year zero coupon PIB this year and successfully raised Rs610 billion through this instrument. In addition to the existing 3-year and 5-year Ijara Sukuk, the government also introduced a 10-year Sukuk, both variable and fixed rate, with a target to diversify Shariah-compliant instrument base.

External public debt was recorded at US$87.4 billion at end-March 2025, revealing an increase of around US$883 million during the first nine months of the current fiscal year compared to an increase of US$2.6 billion during the same period of the last fiscal year.

Pakistan’s total external public debt consists of two components: government external debt and debt obtained from the IMF. Government external debt accounts for the majority, amounting to US$79,131 million, while debt from the IMF stands at US$8,277 million. The IMF debt further consists of the federal government debt (US$3,878 million) and the central bank debt (US$4,399 million).

The government’s external debt is predominantly long-term in nature, with US$78,181 million long-term debt (greater than one year) and only US$950 million as short-term debt (less than one year). This is in line with the government’s external debt strategy that leans heavily on long-term financing, which typically carries lower repayment pressures. Among long-term external debt sources, multilateral loans form the largest portion, totaling US$40,468 million, constituting around 51.8 percent of the long-term external debt. These loans are provided by development partners like the World Bank and Asian Development Bank and are concessional in nature, with lower interest rates and extended repayment periods. The Paris Club debt amounts to US$5,943 million, representing approximately 7.6 percent of Pakistan’s long-term external public debt. These loans are also concessional, offering longer repayment periods and lower interest rates. Bilateral loans from non-Paris Club countries amount to US$17,860 million (22.8 percent of long-term debt). The Government of Pakistan’s international capital markets debt in the form of Eurobonds and international sukuk amounts to US$6,800 million which constitutes 8.7 percent of long-term debt. These debt obligations are long-term in nature with market-based interest rates. Outstanding loans from foreign commercial banks amount to US$5,850 million constituting around 7.5 percent of long-term debt. These loans are short-to-medium term (i.e., 1-3 years) with market-based interest rates.

Other foreign debt in terms of Naya Pakistan Certificates, non-resident investment in government securities, and Pakistan Banao Certificates etc., constitute around 1.5 percent. This category falls under the short to-medium term nature of debt with market based interest rate. Short-term debt, which poses refinancing risk, is significantly lower. Multilateral short-term loans amount to US$426 million, while local currency securities (T-bills) add another US$524 million. Pakistan’s external public debt portfolio reflects a strategic approach emphasizing long-term, concessional loans primarily sourced from multilateral and bilateral partners. This prudent strategy has mitigated immediate repayment pressures.

Permanent debt, which comprises long-term instruments such as Pakistan Investment Bonds (PIBs), Government Ijara Sukuk (GIS), and Prize Bonds, rose from Rs33.2 trillion in June 2024 to Rs40.0 trillion in March 2025. This reflects an increase of Rs6.8 trillion during the first nine months of FY2025. PIBs increased by Rs5.6 trillion, GIS rose by Rs1.2 trillion, and Prize Bonds saw a marginal rise of Rs16 billion. Overall, permanent debt accounts for nearly 78 percent of the total domestic debt, up from around 70 percent in June 2024, indicating increased reliance on longer-term borrowing to ensure debt sustainability.

However, the floating Debt Floating debt declined to Rs7.86 trillion by end March 2025, compared to Rs10.25 trillion in June 2024, showing a notable reduction of Rs2.4 trillion. This was due to the retirement of Market Treasury Bills (MTBs). This is in line with the government’s strategy to move away from short-term borrowing to reduce rollover risk and interest rate risk. The share of floating debt dropped to 15 percent by March 2025, down from 22 percent at the end of FY2024.

Unfunded debt rose slightly from Rs2.80 trillion in June 2024 to Rs2.94 trillion in March 2025, recording a net increase of Rs137 billion during the first nine months. Notable increases were seen in Behbood Savings Certificates (+Rs 73 billion), Pensioners’ Benefit Account (+Rs35 billion) and Savings Accounts (+Rs10.5 billion). Some instruments saw minor declines, such as the GP Fund, which dropped from Rs43.7 billion to Rs27 billion. The share of unfunded debt remained relatively constant at around 6 percent of the domestic debt portfolio.