Public Debt Rises to Rs74 Trillion in First Half of FY25
ISLAMABAD: The nation’s total public debt surged to Rs74.103 trillion by the end of December 2024, marking a nearly 10% increase within six months. Despite this substantial rise, government officials maintain that debt-related risks are diminishing and overall indicators are improving.
According to the Ministry of Finance’s (MoF) latest debt bulletin, total public debt saw a sharp jump from Rs67.330 trillion in June 2024 to Rs74.013 trillion by December, reflecting an increase of Rs6.683 trillion. However, authorities attributed this to controlled economic factors, fiscal discipline, and enhanced debt sustainability during the first half of the 2024-25 financial year.
Improved Debt Indicators and Economic Stability
The MoF report highlighted that public debt growth in the first six months of FY25 was 3.9%, significantly lower than the 7% increase recorded in the same period the previous year. Government officials cited a substantial primary surplus and a stable exchange rate as key contributors to better debt management.
For the first time in two decades, the primary balance showed a surplus of 0.9% of GDP in FY24, which improved further to 2.9% during July-December FY25. This fiscal consolidation led to a positive shift in Pakistan’s credit rating, with international rating agencies upgrading it by one notch and improving the outlook from stable to positive.
Debt Maturity and Financing Strategies
The government’s debt risk profile exhibited notable improvement. The average maturity period for domestic debt extended from 2.9 years in June 2024 to 3.4 years by December, while the external debt maturity period remained stable at 6.2 years. External debt accounted for 32.6% of total public debt, mitigating risks linked to exchange rate fluctuations.
Domestic borrowing remained the primary source of financing, largely through the issuance of long-term Pakistan Investment Bonds (PIBs) and Government Ijarah Sukuks (GIS). Additionally, the government launched a ‘Government Securities Buyback and Exchange Programme,’ facilitating a buyback of approximately Rs1 trillion and reducing debt servicing costs by Rs31 billion.
External Borrowing and Multilateral Support
A significant portion of external inflows stemmed from multilateral sources, while bilateral loan repayments continued. The government categorizes total public debt as liabilities owed by the central government—including federal and provincial obligations—along with debts payable to the International Monetary Fund (IMF).
The first half of FY25 saw public debt rising by 3.9%, with domestic debt increasing by 5%. This represented a slower growth rate compared to the same period in FY24, where domestic debt surged by 9%. Currently, domestic liabilities constitute about 67% of total public debt, while external borrowing accounts for the remaining 33%.
Frequently Asked Questions (FAQs)
1. What led to the increase in Pakistan’s public debt?
The rise in public debt is mainly due to domestic borrowing, fiscal deficits, and external loan repayments. However, controlled economic factors and fiscal discipline have helped manage this growth effectively.
2. How has the government addressed debt sustainability?
The government has implemented fiscal consolidation measures, maintained a primary surplus, and introduced a buyback program to reduce debt servicing costs.
3. What portion of public debt is external?
Currently, external debt accounts for approximately 32.6% of total public debt, reducing exposure to exchange rate volatility.
4. Has Pakistan’s credit rating improved?
Yes, international rating agencies upgraded Pakistan’s credit rating by one notch, shifting the outlook from stable to positive due to fiscal improvements.
5. How does the government plan to manage future debt growth?
The government aims to continue fiscal consolidation, prioritize long-term domestic bonds, and limit reliance on short-term borrowing to maintain stability.
