By Staff Reporter
KARACHI: Pakistan’s central government debt surged 12% to Rs76.05 trillion in May from a year earlier, intensifying fiscal strains on South Asia’s second-largest economy.
The increase reflects heavy reliance on domestic borrowing as external funding options remain limited.
The central government’s debt stood at Rs76.045 trillion in May, up more than Rs8.31 trillion, or 12.3%, from Rs67.73 trillion in May 2024, according to the State Bank of Pakistan’s (SBP) debt bulletin.
Domestic debt, which ballooned 15.9% to Rs53.46 trillion, drove much of the rise, while external debt edged up 4.52% to Rs22.59 trillion over the same period. The figures highlight a sharp escalation in borrowing, with the debt pile expanding by Rs1.11 trillion in just one month from April to May, outpacing the Rs1.035 trillion increase seen in the same stretch of 2024.
The numbers paint a stark picture of Pakistan’s fiscal trajectory. Total debt and liabilities had already hit Rs89.83 trillion by the end of March 2025, per earlier SBP data, a burden that’s increasingly tilting toward long-term instruments.
Pakistan Investment Bonds (PIBs) accounted for Rs35.24 trillion of the public debt in May, a hefty jump from Rs27.70 trillion a year ago. Meanwhile, market treasury bills, a shorter-term financing tool, slipped to Rs8.04 trillion from Rs9.44 trillion in May 2024, signaling a shift in the government’s borrowing strategy.
Finance Minister Muhammad Aurangzeb has pointed to some relief amid the rising tide of debt. “The government saved Rs850 billion through refinancing,” he said earlier this year, highlighting efforts to manage the growing liabilities. Still, the savings did little to stem the surge in domestic debt, which climbed Rs5.36 trillion to Rs52.52 trillion in April 2025 from Rs47.16 trillion in June 2024.
In the first nine months of the prior fiscal year (July 2024 to March 2025), domestic debt rose by Rs4.8 trillion, fueled largely by greater mobilisation through PIBs, while shorter-term instruments saw a pullback.
The rapid debt buildup raises red flags for Pakistan’s economy, already strained by high interest rate, a fragile currency, and sluggish growth. The pivot to long-term bonds suggests an attempt to lock in financing and ease refinancing risks, but it comes at the cost of higher interest obligations down the road. Domestic borrowing, in particular, has surged as external funding remains constrained, with global lenders keeping a close eye on Islamabad’s fiscal discipline.
The SBP data shows Pakistan’s reliance on debt to plug budget gaps is accelerating. The Rs1.11 trillion monthly increase from April to May alone reflects the urgency of the government’s financing needs. Analysts warn that without structural reforms, such as widening the tax net or curbing spending, the debt spiral could squeeze out funds for critical infrastructure sector.
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