KARACHI: Pakistan’s federal government witnessed a significant surge in its total debt stock, which climbed to Rs 71.6 trillion by the end of December 2024. This sharp increase is primarily attributed to continued borrowing to bridge the fiscal deficit, according to official data released by the State Bank of Pakistan (SBP) on Friday.
The SBP report revealed that the central government’s total debt, encompassing both domestic and external liabilities, grew by 4 percent during the first half of the fiscal year 2025 (FY25). The total debt stock, which stood at Rs 68.914 trillion in June 2024, escalated to Rs 71.647 trillion by December 2024, reflecting an increase of Rs 2.733 trillion.
The primary driver behind this debt escalation was domestic borrowing, which rose by 5.7 percent or Rs 2.723 trillion during the period. Domestic debt increased from Rs 47.16 trillion in June 2024 to Rs 49.883 trillion by the end of December 2024. This domestic debt comprised long-term loans amounting to Rs 41.106 trillion and short-term borrowings totaling Rs 8.696 trillion.
Meanwhile, external debt in rupee terms registered a marginal rise of Rs 10 billion in the first half of FY25. The external debt stock grew from Rs 21.754 trillion in June 2024 to Rs 21.764 trillion by December 2024. The SBP reported that the Weighted Average Customer Exchange Rate for the US dollar was Rs 278.3668 in June 2024 and Rs 278.5672 in December 2024, contributing minimally to the increase in external debt.
Financial analysts have pointed out that despite a robust 26 percent increase in the Federal Board of Revenue’s (FBR) tax revenues during July-December FY25, the government was compelled to accumulate additional debt due to a shortfall in meeting its tax collection targets. The resulting fiscal gap necessitated increased borrowing, thereby adding to the national debt burden.
The SBP has emphasized the urgency of accelerating tax revenue growth to mitigate the rising debt. Achieving the primary balance target remains a significant challenge, though the central bank anticipates that lower-than-expected interest payments may help contain the overall fiscal deficit within projected limits.
With the debt stock continuing to rise, economic experts stress the importance of implementing structural reforms to reduce reliance on borrowing and ensure sustainable fiscal management in the long term.