Pakistan public debt rose to a staggering Rs 80.5 trillion by the end of June 2025, highlighting mounting fiscal stress and growing pressure on the national economy. The figure marks a sharp increase from Rs 71.2 trillion recorded a year earlier, according to the Fiscal Policy Statement released by the Ministry of Finance and presented in Parliament on January 28, 2026.
The rapid expansion of Pakistan public debt reflects continued reliance on borrowing to meet government expenditure, alongside rising debt servicing costs and macroeconomic vulnerabilities.
Per Capita Debt Burden Continues to Rise
Along with the overall increase, the burden on individual citizens has also intensified. Per capita debt rose by 13 percent over the year, reaching Rs 333,041 per person. This rise underscores how Pakistan public debt is increasingly translating into higher indirect pressure on households through inflation, taxation measures, and reduced fiscal space for development spending.
Economists warn that sustained growth in per capita debt limits the government’s ability to invest in social services and infrastructure critical for long-term growth.
Fiscal Deficit Breaches Legal Limit
The Fiscal Policy Statement revealed that the federal fiscal deficit reached 6.2 percent of GDP, significantly exceeding the legally mandated ceiling of 3.5 percent set under the Fiscal Responsibility and Debt Limitation Act. In absolute terms, the deficit overshot the limit by approximately Rs 3.1 trillion.
This widening gap has directly contributed to the rise in Pakistan public debt, raising concerns about fiscal discipline and long-term debt sustainability.
Debt-to-GDP Ratio Moves Higher
Public debt as a percentage of GDP climbed to 70.7 percent in FY25, compared to 67.6 percent in the previous fiscal year. The Ministry of Finance attributed the increase primarily to higher interest payments on domestic and external borrowing, as well as adverse exchange rate movements that inflated the rupee value of foreign debt.
Analysts note that Pakistan public debt remains highly sensitive to currency fluctuations, given the significant share of external obligations.
Related: Pakistan Total Public Debt Reaches 71% of GDP in a Decade
Interest Payments Dominate Government Spending
Debt servicing emerged as the single largest expenditure item, with the government spending Rs 8.8 trillion on interest payments during the fiscal year. This amount exceeded combined spending on several key sectors, highlighting how Pakistan public debt is crowding out productive and social expenditure.
In comparison, defense spending stood at Rs 2.2 trillion, while subsidies amounted to Rs 1.3 trillion, largely driven by energy and food-related support measures.
Revenue Shortfalls Add to Fiscal Pressure
On the revenue side, tax collection fell short of targets, reaching Rs 11.7 trillion. Slower economic activity, compliance challenges, and structural weaknesses in the tax system contributed to the shortfall.
Non-tax revenue reached Rs 5.1 trillion, supported by higher petroleum levy collections and profits transferred by the State Bank of Pakistan. However, officials acknowledged that reliance on such sources is not a sustainable solution to containing Pakistan public debt.
Government Highlights Debt Management Strategy
In response to rising debt pressures, the Ministry of Finance emphasized its Medium-Term Debt Management Strategy. The plan focuses on reducing gross financing needs, extending the maturity profile of public debt, and diversifying funding sources to reduce refinancing risks.
Officials stated that improving fiscal discipline, broadening the tax base, and maintaining macroeconomic stability are critical to slowing the growth of Pakistan public debt over the medium term.
Economic Stability Hinges on Structural Reforms
Economists caution that without structural reforms, Pakistan public debt will continue to rise, limiting economic flexibility and increasing vulnerability to external shocks. Sustainable debt reduction, they argue, requires consistent policy implementation, export growth, and prudent expenditure management.
The latest figures underscore the urgency of reform as Pakistan navigates a challenging economic environment marked by high borrowing costs and constrained fiscal space.
