Pakistan’s central government debt has increased by over Rs 7 trillion in 2025, representing a nearly 10% rise. This trend poses a significant risk of diverting resources away from private investment, job creation, and public services, as highlighted in a report. The surge in debt, largely fueled by domestic borrowing, has led the government to rely on local markets to address fiscal shortfalls while keeping external debt relatively stable.
The report warns that if this trajectory continues, Pakistan could potentially become one of the worst-run countries globally without prompt resolution. The escalating debt levels could hamper private investment and job creation, potentially leading to a future with limited economic opportunities. Rising short-term borrowing has also made debt servicing more costly, forcing the state to seek fresh borrowing to meet its obligations.
The unchecked growth in debt is a cause for concern, as it limits funds available for private investment. Financial institutions may opt for safer investments in government bonds over riskier ventures in industries or entrepreneurship. Additionally, reports indicate that Pakistan’s focus on short-term expatriate remittances and foreign aid over sustainable development has trapped the country in an economically precarious situation.
Recent assessments suggest that Pakistan’s heavy reliance on remittances, now constituting nearly 10% of GDP, masks underlying economic challenges such as idle factories and high unemployment rates. The country’s history of entering numerous IMF programs, totaling over $34 billion since 1958, underscores its increasing dependence on aid. The latest Extended Fund Facility of $7 billion, extended into 2025-26, highlights Pakistan’s growing aid reliance and economic vulnerabilities.
