Pakistan’s Total Debt Grows by Rs. 8.97 Trillion in FY25

In a concerning development for the country’s economic stability, Pakistan’s total debt burden has surged by Rs. 8.97 trillion during the first eight months of the fiscal year 2024-25 (FY25). According to official data released by the State Bank of Pakistan (SBP), the country’s total debt and liabilities have reached unprecedented levels, raising serious concerns among economists, investors, and policymakers.

As per the SBP data, Pakistan’s debt growth in FY25 is attributed to domestic borrowing, external loans, and currency devaluation:

• Domestic Debt  Increased by Rs. 5.2 trillion due to heavy government reliance on borrowing from local banks and financial institutions.

• External Debt  Rose by Rs. 3.3 trillion, largely due to foreign loans, IMF disbursements, and currency depreciation against the US dollar.

• Total Public Debt now stands at Rs. 72.5 trillion as of February 2025.

Economists say that Pakistan’s growing dependence on borrowing to meet budgetary needs and debt repayments has placed immense pressure on the economy

Several factors have contributed to this significant increase:

• High Fiscal Deficit → Persistent budget deficits have forced the government to rely on heavy borrowing.

• Rupee Depreciation → The weakening of the Pakistani rupee has increased the rupee value of external loans.

• Debt Servicing Costs → Rising interest rates have significantly escalated the cost of debt repayments.

• Limited Revenue Growth → Slow tax collection and revenue shortfalls have widened the fiscal gap.

• Reliance on External Financing → Frequent borrowing from the IMF, World Bank, and friendly countries has added to the overall debt stock.

The rapid rise in debt is expected to have far-reaching consequences for Pakistan’s economy:

• Higher Inflation → More borrowing leads to a greater money supply, putting upward pressure on prices.

• Increased Debt Servicing Burden → A significant portion of revenue now goes into interest and loan repayments.

• Reduced Development Spending → Limited fiscal space leaves little room for public welfare projects and infrastructure development.

• Lower Investor Confidence → Rising debt levels and economic uncertainty discourage foreign and local investments.

• Greater Dependence on IMF and Lenders → Increasing reliance on external assistance risks policy constraints.

The government has acknowledged the challenges posed by the rising debt and assured that measures are being taken to improve fiscal management and stabilize the economy.

A senior official from the Ministry of Finance stated:

“We are implementing tax reforms, controlling non-essential imports, and working on export promotion strategies to manage the debt burden effectively.”

Additionally, negotiations with the IMF and other international lenders are underway to secure financial stability while minimizing the risks of default.

The increase of Rs. 8.97 trillion in Pakistan’s total debt during FY25 underscores the country’s deepening fiscal crisis. Without decisive reforms, Pakistan risks sliding further into economic instability. Sustainable growth requires prudent borrowing, robust revenue generation, and long-term economic planning to prevent future financial shocks.

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