Overview: A Record Public Debt
Pakistan’s public debt rose to an all-time high of 80.5 trillion rupees by the end of June 2025, the Finance Ministry told the National Assembly in a written response. The figure marks a new milestone for the country’s borrowing, reflecting ongoing fiscal imbalances, higher financing needs, and the challenging macroeconomic environment that has persisted in the aftermath of economic shocks and policy tightening.
What Does the Debt Figure Include?
The total public debt represents the combined liabilities of the government, including central government borrowings, provincial obligations carried by the federation, and guaranteed debt. It encompasses both domestic and foreign borrowings, and it is used to fund a wide array of public services, infrastructure projects, and stabilizing measures. While the headline number is striking, analysts stress the importance of understanding the debt’s composition, tenure, and cost of servicing when assessing sustainability.
Context: Why Debt Has Risen
Several factors have contributed to the elevated debt level. Prolonged fiscal deficits, currency depreciation, and a higher cost of borrowing in international markets have pushed up interest payments and rollover needs. Domestic reliance on treasury securities and external financing to support development projects and social programs has also driven the debt stack higher. In a constrained revenue environment, financing gaps have often been bridged with new borrowing rather than immediate expenditure cuts.
Implications for the Economy
Debt sustainability and growth: A higher debt stock can constrain growth if a large share of revenue is diverted to interest payments rather than investment. Analysts watch the debt-to-GDP ratio as a key indicator, along with the maturity profile and the currency composition of the borrowings. If the country can secure more favorable terms or implement reforms that raise growth without widening deficits, the debt burden can gradually become more manageable.
Fiscal space and policy options: With debt at an unprecedented level, policymakers face tough choices. Potential strategies include improving revenue collection, rationalizing subsidies, prioritizing high-impact public investments, and pursuing macroeconomic stabilization measures agreed with international lenders. Structural reforms—such as improving governance, enhancing tax administration, and bolstering electricity sector stability—could help reduce the deficit over time and create room for essential development spending.
What’s Next: Policy Pathways
To address the debt challenge, the government may pursue a mix of consolidation and growth-oriented policies. Short-term steps could include targeted expenditure rationalization and enhanced fiscal monitoring. Medium- and long-term measures might focus on diversifying the revenue base, improving public financial management, and creating an enabling environment for private investment. Confidence from international lenders, market access terms, and continuity of reforms will influence the trajectory of Pakistan’s public debt in the coming years.
Public Accountability and Transparency
The Finance Ministry’s disclosure to the National Assembly is part of ongoing fiscal accountability efforts. Transparent reporting on debt composition, maturity, and servicing costs helps lawmakers assess risk, align budget priorities, and communicate with voters about the government’s debt management strategy.
Bottom Line
The end-June 2025 debt figure of 80.5 trillion rupees highlights the scale of Pakistan’s borrowing challenges. While debt alone doesn’t determine economic health, its trajectory interacts with growth, inflation, and fiscal policy. Steady reforms, prudent borrowing, and credible macroeconomic management will be essential to ensure that the public debt remains sustainable while the government continues to fund essential services and development projects.
