Finance Ministry Report Shows Sharp Rise in Pakistan’s Debt

Web Desk | 6 months ago

ISLAMABAD: Pakistan’s total debt has increased nearly fourfold over the past decade, according to an official report from the Ministry of Finance.

The report highlights a steep rise in the country’s debt-to-GDP ratio — climbing from around 60 percent in 2016 to 71 percent in 2025. Officials warn that without stricter fiscal discipline, the ratio could reach 85 percent by 2035.

Data from the report shows that 89 percent of the federal government’s net income in fiscal year 2025 was consumed by debt servicing, compared to 120 percent in FY2023, leaving limited fiscal space for development and welfare spending.

Pakistan’s domestic debt surged from Rs13.6 trillion in 2016 to Rs54.5 trillion by mid-2025, while external debt rose from Rs6 trillion to Rs26 trillion during the same period. The finance ministry noted that most of the debt servicing expenditure — about 89 percent — went toward interest payments, with only 11 percent used to repay principal amounts.

The ministry cautioned that continued borrowing without meaningful reforms could lead to long-term fiscal instability, urging the implementation of measures to boost revenue and control expenditure.

Meanwhile, the International Monetary Fund (IMF), in its Fiscal Monitor Report 2025, presented updated forecasts for Pakistan’s fiscal performance. According to the IMF, the country’s public debt-to-GDP ratio is expected to gradually decline from 71.6 percent in 2024 to 71.3 percent in 2025, and further down to 60.2 percent over the next five years.

However, the Fund warned that Pakistan’s fiscal deficit may slightly widen this year to 4.1 percent of GDP, surpassing the government’s target of 3.9 percent. The deficit is expected to narrow gradually to 2.8 percent in the medium term.

Economists say the figures underscore the urgent need for structural reforms, improved tax collection, and sustainable fiscal management to avoid a deepening debt crisis.