Key Takeaways
- Pakistan’s public debt surged to $286.8 billion in June 2025
- Debt-to-GDP ratio climbed to 70%, up from 68% a year earlier
- Domestic debt rose 15% while external debt increased by 6%
- Economic recovery continues with 2.5% growth in 2024
Pakistan’s public debt has reached alarming levels, hitting $286.8 billion (PKR 80.6 trillion) as of June 2025 according to the Ministry of Finance’s Annual Debt Review. This represents a significant 13% increase from the previous year, raising concerns about the country’s fiscal health.
Debt Breakdown and Key Metrics
The debt-to-GDP ratio climbed to approximately 70% in June 2025, up from 68% a year earlier. The report attributes this worrying increase primarily to lower-than-expected nominal GDP growth, with subdued inflation hampering economic expansion despite ongoing fiscal consolidation efforts.
Domestic debt stood at PKR 54.5 trillion, showing a 15% year-on-year increase—the lowest rise in three fiscal years. Meanwhile, external debt reached PKR 26.0 trillion ($91.8 billion), marking a 6% increase from previous levels.
External Debt Sources and Provincial Breakdown
External debt growth was supported by disbursements from the International Monetary Fund (IMF), an ADB-guarantee-backed commercial loan of $1 billion, and inflows from other multilateral institutions.
Provincial debt also showed significant increases across Pakistan:
- Punjab: $6.18 billion (7% of total)
- Sindh: $4.67 billion (5%), showing the sharpest rise
- Khyber Pakhtunkhwa: $2.77 billion
- Baluchistan: $371 million
- Pakistan-occupied Kashmir: $281 million
Overall, the federal government holds 84% of external public debt while provinces account for the remaining 16%.
Economic Recovery and IMF Support
Pakistan’s economy has been gradually recovering after two years of instability. The IMF recently reached a staff-level agreement with Islamabad on loan programs, potentially enabling access to $1.2 billion under its Extended Fund Facility and Resilience and Sustainability Facility, pending final board approval.
This agreement aims to strengthen macroeconomic stability, rebuild market confidence, and support comprehensive fiscal and structural reforms.
Positive Economic Indicators
The Economic Survey 2024-25 indicated Pakistan’s economy grew 2.5% in 2024, with projected growth of 2.7% for 2025. Other positive fiscal developments include:
- Current account surplus of $1.9 billion during July-April FY25
- Rising remittances estimated at $37-38 billion by year-end
- External reserves increased to $16.64 billion by June 2025
These improvements reflect growing investor confidence and recent global ratings upgrades, suggesting the economy may be turning a corner despite the substantial debt burden.
