Public debt rises to Rs80.5 trillion in FY25, debt-to-GDP ratio climbs to 70.7%

Pakistan’s total public debt rose to Rs80.5 trillion in FY25, increasing by Rs9.3 trillion from Rs71.2 trillion a year earlier and remaining well above the 60 percent of GDP ceiling set under the Fiscal Responsibility and Debt Limitation Act (FRDLA), according to the latest debt policy statement to be tabled in parliament.

The Ministry of Finance reported that total public debt increased by 13 percent year-on-year to Rs80,518 billion by end-June 2025. Of this, domestic debt accounted for Rs54,472 billion, while external debt stood at Rs26,047 billion. When liabilities are included, total public debt and liabilities amounted to Rs92.7 trillion.

In GDP terms, public debt rose to 70.7 percent as of June 2025. Under the FRDLA definition, which nets out government deposits held in the banking system, the debt-to-GDP ratio stood at 64.3 percent, still above the statutory limit.

Domestic debt was the main contributor to the annual increase, rising by Rs7,312 billion, or 16 percent, during FY25. This pace was slower than the 22 percent growth recorded in FY24. In the first quarter of FY26, domestic debt declined by about 2 percent to Rs53,424 billion, reflecting the government’s decision to retire Rs1 trillion of borrowing from the State Bank of Pakistan.

Permanent debt, comprising medium- to long-term instruments such as Pakistan Investment Bonds and government Ijarah Sukuks, increased by 26 percent year-on-year to Rs41,777 billion by end-June 2025. The rise was driven by higher issuance of medium- and long-term securities. By end-September 2025, permanent debt declined by 2.4 percent following the settlement of Rs1 trillion in PIBs with the central bank.

Floating rate debt, largely made up of market treasury bills with maturities of less than one year, fell by 14.5 percent during FY25 to Rs8,756 billion. The decline aligns with the government’s stated strategy to reduce refinancing risks by lowering reliance on short-term borrowing. This trend continued in the first quarter of FY26, with outstanding treasury bills falling to Rs8,400 billion.

Unfunded debt, raised mainly through National Savings Schemes, increased by 8.7 percent year-on-year to Rs3,021 billion by end-June 2025 and accounted for around 6 percent of total domestic debt.

External public debt rose by 6 percent year-on-year to $91.8 billion by end-June 2025, an increase of about $5 billion. In the first quarter of FY26, it declined slightly to $91.4 billion. Most of the increase during FY25 came from multilateral lenders, including the IMF, with inflows rising by nearly $4 billion. Borrowing from commercial banks increased by about $1.6 billion, largely due to a $1 billion loan backed by an Asian Development Bank policy-based guarantee.

Multilateral institutions now account for 56 percent of Pakistan’s external debt, while bilateral partners, including Paris Club members and bilateral deposits, make up around 26 percent. International bonds represent 7 percent, commercial banks 8 percent, and other sources, including Naya Pakistan Certificates, about 2 percent.

The finance ministry noted that the share of external debt in total public debt declined from 34 percent in June 2024 to 32 percent in June 2025, remaining within the 40 percent ceiling set under the medium-term debt strategy, though still exposed to exchange rate risks.