Pakistan debt-to-GDP rises to 70.7% as GDP misses target, finance minister tells NA

Pakistan’s public debt-to-GDP ratio rose to 70.7%, exceeding the projected 64% for FY25, as nominal GDP came in lower than expected at Rs113.9 trillion compared to Rs124.1 trillion, according to Finance Minister Muhammad Aurangzeb.

In a written reply to the National Assembly, the minister said public debt stood at Rs80.52 trillion, slightly above projections. He attributed the higher ratio primarily to lower inflation, which reduced nominal GDP growth.

During July–January FY2026, the fiscal deficit was contained at Rs64.7 billion (0.05% of GDP), compared to Rs2,070.9 billion (1.8% of GDP) in the same period last year. The primary surplus reached Rs4,151.6 billion, equivalent to 3.2% of GDP.

The minister said GDP growth in the first quarter of FY2026 was estimated at 3.71%, driven by agriculture (2.9%), industry (9.4%) and services (2.35%). Large-scale manufacturing recorded growth of 5.8% during July–January FY2026, compared to a contraction in the same period last year.

Inflation, measured by the Consumer Price Index, averaged 5.5% during July–February FY2026.

On the debt side, interest payments for FY2025 stood at Rs8.89 trillion, lower than the budgeted Rs9.78 trillion, supported by a decline in the State Bank of Pakistan policy rate and improved fiscal balances. The growth rate of public debt remained around 13% over the past two fiscal years.

For the March–May 2026 period, the government has targeted borrowing of Rs7.8 trillion against maturities of Rs5.5 trillion. Officials said the remaining borrowing will be used to meet expenditure needs and maintain cash reserves, with final amounts to be determined through market auctions.