ISLAMABAD: Pakistan’s public debt exceeded the statutory ceiling set by parliament by about Rs17 trillion during the last fiscal year, underscoring mounting fiscal pressures even as the government sought to lower refinancing risks by stretching the maturity of domestic borrowing, official documents showed.
According to the Debt Policy Statement 2026, public debt climbed to 70.7% of gross domestic product (GDP), far above the 56% limit prescribed under the Fiscal Responsibility and Debt Limitation Act (FRDLA). The excess amounted to Rs16.8 trillion, or nearly 15% of GDP, for fiscal year 2024-25.
The Ministry of Finance acknowledged the rise in the debt-to-GDP ratio but told parliament it remained committed to bringing debt to sustainable levels through fiscal consolidation, primary budget surpluses and a gradual reduction in the deficit.
Another official document, the Fiscal Policy Statement 2026, showed the federal fiscal deficit also breached the prudent ceiling by 2.7% of GDP.
Despite the ballooning debt, the government reported progress in reducing refinancing risks by shifting away from short-term borrowing. The share of short-term Market Treasury Bills fell from 24% in June 2024 to 16.6% by the end of the last fiscal year, raising the average maturity of domestic debt from 2.8 years to 3.8 years.
The finance ministry said the strategy focused on issuing more medium- and long-term Pakistan Investment Bonds and Sukuk, taking advantage of a declining interest rate environment.
External debt maturity, however, edged down slightly to about 6.1 years as the government relied more on commercial borrowing. Commercial loans increased from $5.5 billion to $7.2 billion, including a $1 billion facility backed by an Asian Development Bank guarantee.
Total public debt rose 13% year-on-year to about Rs80 trillion by June 2025, with domestic debt at Rs54.4 trillion and external debt at Rs26.1 trillion. In dollar terms, external debt increased 6% to $91.8 billion, driven largely by higher borrowing from multilateral lenders such as the International Monetary Fund.
More than half of Pakistan’s external obligations are now owed to multilateral institutions, while bilateral partners account for roughly a quarter.
Meanwhile, tax collection shortfalls continued to strain public finances. The Federal Board of Revenue collected Rs7.17 trillion during July–January, missing its revised target by Rs347 billion and posting growth far below what is needed to meet the annual goal.