In a troubling sign for Pakistan’s fiscal health, public debt has ballooned to 70.7% of GDP during FY 2024-25, smashing through the 56% ceiling set by parliament. Details from the ‘Debt Policy Statement 2026’ expose this overrun, with debt exceeding limits by 16.8 trillion rupees – a whopping 14.7% of GDP.
This breach reveals systemic flaws in governance: expenditures are approved first, loans secured later, and excuses fabricated afterward. Rules for financial prudence are ignored, and lawmakers learn of violations post-facto, with no repercussions for the administration.
Pakistan’s economy clings to a spendthrift model, shunning reforms and leaning heavily on borrowing. The fallout is evident – debt repayments devour almost 50% of the federal budget, starving infrastructure and development schemes. PSDP allocations dwindle, essential investments falter, and citizens endure rising taxes amid existing strains.
Domestic debt servicing has dominated spending trends over three years, shrinking space for economic revival. Ministry pledges to parliament ring increasingly empty against this backdrop.
While admitting the worsened metrics, officials claim commitment to legal frameworks, outlining austerity measures, surplus creation, and deficit cuts for sustainability. Yet, the current year’s start is ominous: FBR revenue fell short by 347 billion rupees in the first half, pushing greater dependence on accounting maneuvers to downplay the debt squeeze.