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Pakistan's Debt Hits 70.7% of GDP as Fiscal Deficit Breaches Limit

Pakistan's finance ministry reports that public debt has climbed to 70.7% of GDP, driven largely by high interest payments and currency fluctuations. The fiscal deficit exceeded the legal limit by Rs 3.1 trillion, even as defense spending overshot its budget while development expenditure fell short. The report highlights the challenge of debt management amid spending that contradicts claims of austerity. The government's medium-term strategy now focuses on reducing financing needs and extending debt maturities.

Key Points: Pakistan's Public Debt Soars, Fiscal Deficit Breaches Limit

  • Debt per citizen up 13%
  • Defense overshoots budget by 103%
  • Fiscal deficit breaches limit by Rs 3.1 trillion
  • Development spending falls short
3 min read

Pakistan's public debt soars to 70.7 pc of GDP as fiscal deficit breaches limit

Pakistan's public debt rises to 70.7% of GDP, driven by high interest payments and defense spending, while fiscal deficit exceeds statutory limits.

"public debt dynamics remained a key challenge - Finance Ministry report"

New Delhi, Jan 29

Pakistan's finance ministry has admitted that "public debt dynamics remained a key challenge" during the last fiscal year, as the increase in total public debt was "driven mainly by higher interest payments and exchange rate movements," according to a report in the Karachi-headquartered Express Tribune newspaper.

The debt burden of every Pakistani increased by 13 per cent to Rs 333,000 (Pakistani rupee) in the last financial year, while public debt remained a "challenge" due to a budget deficit that exceeded the statutory limit by Rs3 trillion, according to a Fiscal Policy Statement presented to Parliament in the neighbouring country.

The figures also show the high priority that Pakistan accords to defence expenditure, reflecting the formidable control that the military exercises over the government. The welfare of the people on the other hand is relegated to the background in the budget.

Development expenditure, including net lending, was budgeted at Rs 1.7 trillion, but actual spending was Rs 1.4 trillion, equivalent to 84 per cent of the allocation.

Defence expenditure was budgeted at Rs2.1 trillion, while actual expenses stood close to Rs 2.2 trillion, representing 103 per cent of the allocated budget, according to the report.

Fiscal year 2024-25 was the first full financial year of the government led by Prime Minister Shehbaz Sharif, which assumed office in April 2024.

The finance ministry said total public debt as a percentage of GDP increased from 67.6 per cent in June 2024 to 70.7 per cent in June 2025.

The statement said that from June 2024 to June 2025, total public debt increased from Rs71.2 trillion to Rs80.5 trillion, mainly due to higher interest payments. These interest costs, the report noted, were the outcome of additional borrowing undertaken to finance spending beyond the limits set in law.

The rise in public debt, both in absolute terms and relative to the size of the economy, undermines the federal government's claim of fiscal discipline. During the year, the government added new departments, expanded the federal cabinet and purchased new furniture and cars despite claiming austerity.

The finance ministry has admitted in the report that "public debt dynamics remained a key challenge" during the last fiscal year, as the increase in total public debt was "driven mainly by higher interest payments and exchange rate movements".

It said the government's medium-term debt management strategy continues to focus on reducing gross financing needs, extending maturity profiles and diversifying financing instruments to ensure sustainability.

The statement further revealed that the federal government spent Rs 3.1 trillion, or 2.7 per cent of GDP, over and above the 3.5 per cent federal fiscal deficit limit set by Parliament.

Revenue collection remained close to budget targets, while expenditures slightly surpassed their budgeted levels, the report added.

- IANS

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Reader Comments

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Sarah B
As someone who follows global economics, this is deeply concerning. A debt-to-GDP ratio crossing 70% is a major red flag. The fact that it's driven by interest payments means they're in a debt trap, borrowing just to pay old loans. Not a sustainable path for any nation.
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Arjun K
While the situation is tough for our neighbours, it's a sobering reminder for India as well. We must stay vigilant about our own fiscal discipline. Defence is important, but true security comes from a healthy, educated population and strong infrastructure. Jai Hind.
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Priya S
Rs 333,000 debt per person? That's heartbreaking. Imagine being born into that burden. The report says they bought new furniture and cars while claiming austerity. The elite are never affected, it's always the aam aadmi who suffers. My sympathy is with the ordinary Pakistani people.
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Vikram M
The military's control over the budget is the root cause. When guns get more money than schools and hospitals, the future of the country is mortgaged. Stability in Pakistan is good for the entire region. Hope they can reform. 🙏
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Karthik V
I respectfully disagree with the tone of some comments that seem to celebrate a neighbour's distress. A struggling economy next door isn't good for anyone. We should hope for responsible governance there, which leads to better trade and regional stability. Let's be compassionate in our analysis.

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