The federal budget for 2025–26 reveals a sobering truth: Pakistan’s financial autonomy is under siege from its growing debt burden. A staggering 46.7% of the total federal budget — Rs8.2066 trillion out of Rs17.573 trillion — is earmarked for debt servicing, making it the single largest expenditure of the year.
Budget Snapshot
While this amount is Rs739 billion less than the revised Rs8.945 trillion for FY2024–25 — an 8.26% drop — it is still an alarming figure that highlights structural economic weaknesses rather than improvement.
Debt Servicing Breakdown:
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Domestic debt repayment: Rs7.197 trillion
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Foreign debt repayment: Rs1.009 trillion
Public Debt Status
As of March 2024, Pakistan’s total public debt stood at a massive Rs76.01 trillion (US$269 billion), having quadrupled over the past decade:
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Domestic liabilities: Rs51.52 trillion
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External liabilities: Rs24.49 trillion
This places the country’s debt at 66.27% of GDP, breaching the legal threshold set by the Fiscal Responsibility and Debt Limitation Act (FRDLA).
Interest Payments (First 9 Months of FY25):
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Rs6.44 trillion total
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Rs5.78 trillion to domestic lenders
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Rs656 billion to foreign creditors
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External Financing Imbalance
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Inflow (Jul–Mar 2025): $5.07 billion
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Multilateral: $2.8B
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Commercial: $2.01B
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Bilateral: $258M
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Outflow: $5.636 billion
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Multilateral repayments: $2.828B
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Bilateral: $1.565B
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Commercial: $1.243B
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This negative net flow continues to strain Pakistan’s foreign exchange reserves.
The Vicious Cycle
Despite claims by the Ministry of Finance regarding improved cash planning and longer-term borrowing instruments, the fiscal situation remains bleak:
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Private investment is shrinking
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The rupee is under pressure
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Inflation is rising
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The government remains trapped in a cycle of borrowing to repay old loans
Conclusion: A Tipping Point?
With debt absorbing nearly half the national budget, Pakistan’s future development is at serious risk. Unless decisive reforms are introduced — from tax structure overhauls to spending discipline — the country may find itself locked in a perpetual debt crisis, sacrificing growth and welfare for survival.
