Pakistan’s finance ministry has recognized the significant challenge posed by public debt dynamics in the previous fiscal year. The rise in total public debt was primarily fueled by increased interest payments and exchange rate fluctuations, as reported by the Karachi-based Express Tribune newspaper. The debt burden per Pakistani surged by 13% to Rs 333,000 in the last financial year, with public debt proving problematic due to a budget deficit surpassing the statutory limit by Rs 3 trillion, according to a Fiscal Policy Statement presented to Parliament.
The data underscores Pakistan’s emphasis on defense spending, highlighting the substantial influence the military holds over the government, while public welfare takes a back seat in budget priorities. Development expenditure, encompassing net lending, was initially set at Rs 1.7 trillion, yet actual spending amounted to Rs 1.4 trillion, equivalent to 84% of the allocation. In contrast, defense expenses were budgeted at Rs 2.1 trillion, but actual outlays reached nearly Rs 2.2 trillion, representing 103% of the allocated budget.
The fiscal year 2024-25 marked the inaugural full financial year under the leadership of Prime Minister Shehbaz Sharif, who assumed office in April 2024. The finance ministry disclosed that the total public debt as a percentage of GDP escalated from 67.6% in June 2024 to 70.7% in June 2025. Over this period, total public debt surged from Rs 71.2 trillion to Rs 80.5 trillion, primarily driven by increased interest payments resulting from additional borrowing to finance expenditures exceeding legal limits.
The mounting public debt, both in absolute terms and relative to the economy’s size, challenges the federal government’s assertion of fiscal discipline. Despite claims of austerity, the government expanded by adding new departments, enlarging the federal cabinet, and procuring new furniture and vehicles. The finance ministry’s report reiterated that the public debt dynamics remained a critical challenge in the last fiscal year, primarily due to escalating interest payments and exchange rate fluctuations.
The finance ministry’s medium-term debt management strategy centers on reducing gross financing needs, extending maturity profiles, and diversifying financing instruments to ensure sustainability. Additionally, the federal government exceeded the 3.5% federal fiscal deficit limit set by Parliament, spending Rs 3.1 trillion, equivalent to 2.7% of GDP. While revenue collection closely aligned with budget targets, expenditures slightly exceeded their budgeted levels, according to the report.
