Pakistan’s total public debt has surged to a staggering PKR 76 trillion over the first nine months of fiscal year 2024–25, according to the newly released Economic Survey. The figures, disclosed on Monday by Finance Minister Muhammad Aurangzeb, mark an alarming increase for the already cash-strapped nation, exacerbating long-standing concerns over fiscal sustainability.
The survey reveals that domestic borrowings mounted to PKR 51.5 trillion, while external obligations reached PKR 24.5 trillion, underscoring the government’s heavy reliance on both local banks and foreign lenders. This dual-pressure on the economy has spurred renewed fears of a debt spiral, particularly as interest payments have consumed a growing share of federal revenues.
Despite the sobering headline figures, Minister Aurangzeb emphasized the economy’s gradual yet tangible recovery. From a contraction of 0.2% GDP growth in 2023, Pakistan saw a modest rebound to 2.5% in 2024, and officials now forecast a further rise to 2.7% in the current fiscal year. This anticipated progression, the minister argued, reflects measured and sustainable economic stabilization.
Aurangzeb also pointed to several macroeconomic improvements, including a current account surplus of approximately USD 1.9 billion during July–April FY25. This uplift was attributed largely to robust IT exports—worth around USD 3.5 billion—and strong remittance inflows, which are expected to total USD 37–38 billion by year-end, compared to USD 27 billion two years ago.
The debt-to-GDP ratio, while high, has shown a slight improvement—from 68% to 65%—offering the Finance Minister hope that Pakistan may be inching toward fiscal resilience. Concurrently, inflation has cooled sharply, with CPI inflation sliding from over 29% in 2023 to approximately 4.6% by mid‑2024, and global inflation easing from 6.8% to 4.3%.
However, the burden remains immense. Over the past decade, Pakistan’s public debt has ballooned roughly five-fold—from PKR 17.4 trillion in 2014–15 to the current PKR 76 trillion—while it nearly doubled in just four years. Heavy reliance on IMF loans—such as a recent US $1 billion tranche from the Extended Fund Facility—and substantial borrowing through China‑Pakistan Economic Corridor (CPEC) projects have been key drivers of external financing.
Economists warn, however, that elevated servicing costs—already consuming more than half of federal revenue—limit space for essential spending in social welfare, infrastructure, and development. Pakistan’s annual interest payments are reported to be over PKR 5 trillion, with domestic debt accounting for 90% of this burden.
From this backdrop, Aurangzeb framed the upcoming year as a potential “turnaround story.” He highlighted planned reforms targeting IMF compliance, improved revenue collection, and selective privatizations. These efforts aim to control the deficit and reduce dependency on foreign debt, even as the government moves to maintain macroeconomic stability.
While optimism is cautiously maintained, Pakistan’s path ahead remains precarious. Key challenges include sustaining remittance inflows, preserving export competitiveness, and avoiding exchange‐rate shocks—especially as global interest rates remain elevated. Economists and market analysts argue that without constant inflows and disciplined reforms, the risk of sliding back remains tangible.
As Islamabad approaches its federal budget next week, attention will focus on whether planned measures can turn cautious recovery into durable growth—and whether debt accumulation can finally be slowed, if not reversed. For now, Pakistan’s economic narrative is one of gradual recovery shadowed by a towering debt legacy.
