Pakistan’s debt burden has reached unprecedented levels, with every citizen now effectively owing Rs318,252, according to the latest report by the Economic Policy & Business Development (EPBD) Think Tank.
The figures reveal a sharp rise from Rs90,047 in 2014, representing an average annual growth of 13% over the past decade.
The country’s public debt-to-GDP ratio now stands at 70.2%, exceeding the 60% legal ceiling set under the Fiscal Responsibility and Debt Limitation Act, 2005.
In regional comparison, Pakistan’s debt ratio is second only to Sri Lanka (96.8%), and higher than Thailand (61.1%), India (57.1%), Indonesia (40.2%), and Bangladesh (36.4%).
The EPBD report highlights several factors aggravating the crisis, including a 71% devaluation of the rupee since 2020, peak interest rates of 22% in fiscal year 2023-24, and repeated breaches of debt sustainability limits.
The think tank warns that the country is caught in a “debt trap,” where high interest rates accelerate currency depreciation, which in turn increases the debt burden, perpetuating a vicious cycle.
To address the crisis, the report recommends urgent fiscal reforms, including strict financial discipline, expansion of the tax base, and debt restructuring measures. It also suggested reducing the policy rate from 11% to 9%, noting that even a two-percentage point cut could lower interest costs by Rs12 trillion, create fiscal space, and enhance business competitiveness.
The EPBD urged the government to channel Pakistan’s Rs7.2 trillion annual debt towards growth-generating activities to prevent the situation from escalating into a full-blown fiscal and economic crisis.
