Pakistan faces an economic reckoning as government debt surges past 70.7% of GDP in FY 2024-25, obliterating the 56% statutory limit. The ‘Debt Policy Statement 2026’ lays bare this excess of 16.8 trillion rupees, or 14.7% over GDP norms, signaling repeated failures in fiscal oversight.
At its core, the problem is structural: spend now, borrow later, rationalize endlessly. Financial guardrails are sidelined, with disclosures to parliament arriving after the damage is done – accountability remains elusive for the executive.
Trapped in a consumption-led paradigm, Pakistan ignores reforms and borrows relentlessly. Half the national budget now funds debt obligations, eroding support for public works. Development programs like PSDP suffer cuts, productive spending evaporates, and tax hikes pile pressure on a weary populace.
The surge in domestic debt costs over recent years has eclipsed all else in expenditures, hobbling growth and deepening the borrowing trap. Finance Ministry vows fall flat amid these realities.
Conceding the ratio’s decline, the government touts adherence to debt laws via belt-tightening, primary balances, and phased deficit reductions. But optimism fades with FBR’s 347 billion rupee revenue shortfall from July-January, amplifying resort to creative financing to obscure mounting pressures.