In the past decade, Pakistan’s debt situation has become a major challenge. Now, reports indicate that debt has risen more than 10 percentage points in the country’s debt-to-GDP ratio, rising from 60% in 2016 to 71% in 2025.
In the 2025 fiscal year, almost 89% of the total income for the government went to debt servicing. The debt servicing consumption in 2023 almost hit 120% of the total income. Also, domestic debt has gone from Rs. 13.6 trillion to Rs. 54.5 trillion, and external debt has risen from Rs. 6 trillion to Rs. 26 trillion till June 2025 (Ministry of Finance).
Official documents warned that if the government continues its current spending levels, the debt-to-GDP ratio could be as high as 85% by 2035. They also reported that roughly 89% of debt repayments over the last decade were for interest, leaving only 11% to repay the principal.
In the Fiscal Monitor Report 2025, the International Monetary Fund (IMF) offered updated observations on Pakistan’s fiscal position. The IMF estimates that Pakistan’s public debt-to-GDP ratio is projected to decrease slowly, from 71.6 percent in 2024 to 71.3 percent in 2025, and will eventually fall to 60.2 percent in the next five years.
Yet, the Fund noted that Pakistan’s fiscal deficit is estimated to increase slightly this year to 4.1 percent of GDP, above the target of 3.9 percent. However, in the long run, the deficit is expected to gradually narrow to approximately 2.8 percent, as long as there is fiscal discipline.
