Pakistan’s debt tops Rs80 trillion, flouts Debt Limitation Act

KARACHI: Pakistan’s gross public debt has reached Rs80.5 trillion by the end of June 2025, revealed a report by the State Bank of Pakistan (SBP). The latest report, issued by the central bank, showed a daily increase of Rs25.4 billion in the country’s debt. The latest debt bulletin from the SBP indicates that the government has exceeded limits set under the Fiscal Responsibility and Debt Limitation Act.

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The figures show an annual increase of Rs9.3 trillion, or 13 per cent, in total public debt compared to the previous fiscal year. The debt-to-GDP ratio also rose from 67.8 per cent to 70.2 per cent. This is problematic because the Debt Limitation Act stipulates that the government reduces the ratio each year until it reaches 50 per cent by fiscal year 2032-33.

The overall debt and liabilities, combining both domestic and external obligations, stood at Rs94.2 trillion, which is 82.1 per cent of GDP.

Rising debt levels have significantly increased debt servicing costs as well. In FY2025, Pakistan spent Rs13.2 trillion in loan repayments and interest. Out of this, Rs9.5 trillion was allocated to interest payments alone. Payments to the International Monetary Fund (IMF) reached Rs162 billion ($570 million).

Domestic debt increased by Rs7.3 trillion, or 15.5 per cent, from Rs47.2 trillion to Rs54.5 trillion. External debt grew from Rs21.8 trillion to Rs23.4 trillion. This increase occurred despite relatively stable exchange rates.

The SBP report notes that most of Pakistan’s external borrowing comes from multilateral and bilateral sources. However, a growing share of short-term external debt raises concerns about refinancing risks. Fixed-rate instruments account for around two-thirds of external obligations.

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Pakistan’s financing needs are currently between 20 per cent and 23 per cent of GDP, significantly above the manageable threshold of 15 per cent for developing countries. These levels also reflect pressures from interest payments and continued fiscal deficits.

The finance ministry has acknowledged the risk of further deterioration in the primary balance, especially in the event of unexpected economic shocks. The country is also dealing with severe flooding, which may impact both budget targets and public debt levels.