Pakistan’s public debt-to-GDP ratio may drop to 70 per cent: ADB

WEB DESK: Pakistan’s public debt is set to decrease significantly, dropping by 7 percentage points to 70 per cent of gross domestic product (GDP) during the fiscal year 2024–2025, as highlighted in the July 2024 Asian Development Outlook (ADO) by the Asian Development Bank (ADB).

Despite this positive outlook, the ADB has raised concerns over the escalating burden of interest payments, which are expected to consume a substantial 62 per cent of fiscal revenues, up from 41 per cent recorded in the 2022–2023 fiscal year.

In contrast to Pakistan, across developing Asia, the average government debt-to-GDP ratio is anticipated to hover around 47 per cent this year, slightly lower than previously projected in April. This trend is supported by robust economic growth, which continues to counterbalance pressures stemming from primary deficits.

Furthermore, the ADB has maintained its inflation forecast for Pakistan at 15 per cent for the fiscal year 2024-25. Additionally, it has adjusted upward its GDP growth projection from its earlier estimate of 2.8 per cent in April for FY25, although the precise new figure was not disclosed in the report.

Regarding regional economic forecasts, the ADB noted, “Downward revisions for GDP growth in Bangladesh and Maldives over the forecast period are offset in 2024 by upward revisions for Bhutan, Nepal, and Pakistan, leaving the region’s 2024 growth forecast unchanged at 6.3 per cent.”

Public debt-to-GDP refers to the ratio of a country’s government debt to its GDP. This ratio measures the size of a country’s debt in relation to its overall economic output, providing an indication of the country’s ability to repay its debt.

A lower ratio suggests a healthier economy with less reliance on borrowing, while a higher ratio may indicate higher financial risk and a greater burden of debt relative to the country’s economic capacity.

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