KARACHI: Government debt increased by Rs8.974 trillion, or 13 per cent, in the fiscal year ending June 30, highlighting its growing reliance on domestic and external borrowing to meet rising fiscal needs.
The central government debt rose to Rs77.888 trillion at the end of June 2025, up from Rs68.914 trillion a year earlier, data from the central bank showed on Tuesday.In June, the debt stock increased by 2.4 per cent, compared to the previous month.
Awais Ashraf, research director of AKD Securities Limited, said that the government’s debt has gone up to finance the budget deficit and to fund interest payments on existing debt.“The government is only able to raise money through taxes, which can cover its costs other than the interest payments. If the government remains committed to its fiscal consolidation drive, then the increase in debt would be reduced by one-fourth during the current fiscal year,” Ashraf said.
The SBP’s data, which was published with almost a one-month delay, showed that the government’s domestic debt stood at Rs54.471 trillion in FY25, up 15.5 per cent from the previous year. This saw a 1.9 per cent rise on a month-on-month basis. Additionally, the external debt rose to Rs23.417 trillion by the end of June, marking a 7.6 per cent increase from a year ago and a 3.7 per cent rise, compared with May.
Saad Hanif, head of research at Ismail Iqbal Securities Limited, said that the latest Pakistan’s debt profile reflects both challenges and encouraging signs.“On one hand, the overall stock of government debt has continued to expand in line with fiscal needs, reflecting reliance on domestic instruments and external support from multilaterals and the IMF,” Hanif said.
“However, the quality of financing has improved, with greater recourse to longer-tenor sukuk and PIBs that reduce rollover risk, while the rise in SBP reserves to multi-year highs provides a stronger external buffer than seen in recent years,” Hanif added.
The strengthening of reserve adequacy, together with steady inflows from multilateral partners, suggests that near-term repayment capacity is more secure than before, he noted.“Going forward, the focus should be on sustaining this momentum by broadening the revenue base and anchoring fiscal consolidation, so that the current improvement in external buffers translates into lasting debt sustainability rather than just temporary relief,” he said.
The government has repaid over Rs1.6 trillion of its debt to the SBP, bringing total early repayments to over Rs2.6 trillion in less than one year. The SBP earned a net profit of Rs2.5 trillion for FY25, with Rs2.428 trillion transferred to the government.
According to the SBP’s data, the country’s total debt and liabilities increased to Rs94.197 trillion in FY25, up from Rs85.457 trillion during the previous year. Interest payments on the total debt surged to Rs9.46 trillion, with domestic debt servicing alone reaching Rs8.07 trillion, despite a decline in interest rates.
In dollar terms, Pakistan’s outstanding total external debt and liabilities increased to $134.97 billion as of June 30, 2025, compared with $131.04 billion in the previous year. The public external debt of the country rose by 5.6 per cent year-on-year (YoY), reaching $103.75 billion in FY25. Debt from multilateral sources amounted to $42.48 billion, which reflects an 8.2 per cent increase from the previous year. The debt owed to the IMF stood at $9.268 billion in FY25, up from $8.378 billion in FY24.
In FY25, the country’s external debt servicing increased, compared to the previous year, due to higher government repayments and a big jump in commercial bank loan maturities, while interest cost stayed almost the same.
The total debt servicing payments amounted to $18.049 billion, up from $16.932 billion in FY24. Of this total, $5.338 billion was paid in interest, a decrease from $11.475 billion the previous year, while $12.711 billion was allocated for principal repayment, compared with $5.458 billion in FY24.
“Pakistan’s external debt servicing is higher this year as the government retired commercial loans worth $2.7 billion and repatriation of $1.47 billion in Naya Pakistan Certificates and NBP/BOC deposits. Moreover, scheduled banks have also repaid debt of $1.3 billion of loans in the second half of this year,” Ashraf said.
According to a report from Topline Securities, Pakistan’s debt-to-GDP ratio slightly increased to 73.2 per cent in FY25, as debt grew faster at 13 per cent than the nominal GDP growth rate, which was 8.0 per cent. The external debt-to-GDP ratio remained unchanged in FY25, reaching a seven-year low. In US dollar terms, external public debt rose by 5.6 per cent, while in Pakistani rupee terms, it increased by 7.6 per cent, both figures being lower than the nominal GDP growth of 8.2 per cent.
Moreover, the ratio of external debt servicing to total exports decreased to 34 per cent in FY25 from 35 per cent in FY24.“External debt servicing to FX reserves is 115 per cent for FY25. This ratio indicates external public debt repayments due in one year as a percentage of the country’s reserves. Notably, this is expected to further improve in FY26 as reserves are expected to improve in June 2026,” the report said.