Pakistan’s Debt Profile
Pakistan’s total public debt has crossed PKR 65 trillion (USD 225 billion) as of December 2023, reflecting a 70% debt-to-GDP ratio, well above the 60% limit prescribed in the Fiscal Responsibility Act.
Debt Breakdown (FY 2023-24)
| Type of Debt | Amount (PKR Trillion) | % of GDP |
| Domestic Debt | 35.2 | 37.8 |
| External Debt | 29.8 | 32.2 |
| Total Public Debt | 65.0 | 70.0 |
Challenges in Debt Management
- Short-Term Borrowing Risks: 52% of Pakistan’s debt is short-term, increasing rollover risks.
- Currency Depreciation: The PKR depreciated 22% in 2023, making external debt more expensive.
- Ballooning Interest Payments: Debt servicing consumes 58% of government revenue, crowding out development spending.
Recommendations for Sustainable Debt Management
- Long-Term, Low-Cost Borrowing: Negotiating concessional loans with IMF, World Bank, and ADB can reduce financing costs.
- Debt Transparency: Publishing quarterly debt reports and ensuring fiscal discipline can restore investor confidence.
- GDP Growth Strategy: Expanding exports, boosting FDI, and privatizing loss-making SOEs can reduce debt reliance.
Without structural reforms, Pakistan risks falling into a debt trap, where new borrowing is needed just to service existing debt.
