Pakistan’s total public debt surged to USD 286.832 billion (PKR 80.6 trillion) by the end of June 2025, marking a 13% increase compared to the previous fiscal year, according to the Finance Ministry’s Annual Debt Review. The country’s Debt-to-GDP ratio rose to approximately 70%, up from 68% in June 2024, reflecting slower-than-expected economic growth and higher borrowing requirements.
Domestic debt accounted for PKR 54.5 trillion, representing a 15% year-on-year rise — the lowest increase in the past three fiscal years. Meanwhile, external debt climbed 6% YoY to USD 91.8 billion, driven by IMF disbursements, a USD 1 billion commercial loan backed by the Asian Development Bank, and inflows from other multilateral institutions.
The distribution of external public debt shows that 84% is held by the federal government, with the remaining 16% managed by provincial and sub-national entities. Punjab remains the largest provincial borrower at USD 6.18 billion (7%), followed by Sindh at USD 4.67 billion (5%), which recorded the fastest growth during FY 2025. Khyber Pakhtunkhwa’s debt increased to USD 2.77 billion (3%), Baluchistan holds USD 371 million, and Pakistan-occupied Kashmir has USD 281 million in debt.
The Finance Ministry noted that the rise in the Debt-to-GDP ratio was largely due to nominal GDP growth falling short of expectations. “Significantly lower inflation in FY-2025 reduced the pace of economic expansion, pushing up the debt-to-GDP ratio despite fiscal consolidation efforts,” the report highlighted.
Economists point out that while Pakistan’s domestic borrowing growth has slowed compared to previous years, external obligations continue to increase due to reliance on international financial support. The combination of slower economic growth and high debt levels has raised concerns about fiscal sustainability and the need for structural reforms.
Looking ahead, Pakistan will likely continue to manage a delicate balance between securing external financing and controlling domestic debt accumulation. The Finance Ministry’s data provides a detailed view of public debt by provincial and federal allocations, underscoring the financial challenges facing the country amid a constrained growth environment.
With mounting debt and a growing share of public liabilities, Pakistan’s fiscal policy and economic management will remain under close watch by the IMF, multilateral lenders, and domestic policymakers in the coming fiscal year.
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