Pakistan keeps running into the same old problem: its public debt just won’t stop growing, and right now it’s grabbing everyone’s attention again. The country has serious, ongoing issues with keeping its finances in check and handling debt responsibly. There’s actually a law on the books—the Fiscal Responsibility and Debt Limitation Act (FRDLA)—that clearly says public debt shouldn’t go above 60% of GDP. Yet Pakistan keeps breaking that rule year after year.
The most recent official numbers show how bad things got in FY2025. Total public debt jumped sharply, driven by deep-rooted budget problems and the government’s habit of borrowing heavily just to cover its day-to-day financing needs. Looking at how the debt breaks down—between what’s borrowed inside the country and what’s borrowed from abroad—gives us a pretty clear picture of the tough choices being made, the risks piling up, and what might lie ahead if things don’t change.
In FY2025, Pakistan’s total public debt shot up to Rs80.5 trillion. That’s a massive increase of Rs9.3 trillion compared to Rs71.2 trillion the year before (FY2024). In other words, the debt grew by more than Rs9 trillion in a single year. Once again, this blew right past the FRDLA limit, which only makes people more worried about whether these fiscal rules are actually taken seriously anymore. The Ministry of Finance puts “public debt” at Rs80.5 trillion, but when you include all liabilities and broader obligations, the real figure climbs to Rs92.7 trillion. That gap shows just how much extra pressure the government is really carrying beyond the headline number.
The debt policy statement says total public debt rose 13% year-on-year to Rs80,518 billion. Out of that, domestic debt made up Rs54,472 billion, while external debt came in at Rs26,047 billion. What stands out is how much the government still leans on borrowing from inside Pakistan, even though loans from abroad continue to play a big role in keeping things afloat.
When you look at it as a share of the economy, the burden is still very heavy. By the end of June 2025, total public debt hit 70.7% of GDP—well over the legal cap. Even when you use the stricter FRDLA definition, the debt-to-GDP ratio was still 64.3%, breaking the law. Seeing this happen repeatedly makes you wonder: Are these fiscal rules really working? And more importantly, is there enough political commitment to actually follow them?
Inside the country, domestic debt remains the biggest part of the picture. In FY2025 it grew by Rs7.3 trillion, reaching Rs54,472 billion—a 16% jump for the year. That’s still a lot, but it’s actually slower than the 22% surge we saw in FY2024, which hints at a bit of cooling off. Then something interesting happened in the first quarter of FY2026: domestic debt actually dropped 2% to Rs53,424 billion. That came after the government paid back Rs1 trillion it owed to the State Bank of Pakistan (SBP). Most people saw this as a smart, welcome move—it helps ease inflationary pressure and puts the country on slightly firmer ground for managing its debt over the long run.
When we break domestic debt down, it falls into three main buckets: permanent debt, floating-rate debt, and unfunded debt. Each one has its own maturity length, cost, and level of risk.
Permanent debt—basically long-term borrowing that lasts more than a year—is the biggest chunk. It includes things like Pakistan Investment Bonds (PIBs) and Government Ijarah Sukuks (GIS), which can have fixed or floating interest rates. By June 2025, this category had jumped 26% year-on-year to Rs41,777 billion. A lot of that growth came from issuing a ton of medium- and long-term PIBs and Sukuks—their outstanding amount rose 33%.
But early in FY2026 the trend flipped. By the end of September 2025, permanent debt fell 2.4%, largely because the government settled Rs1 trillion worth of PIBs that the SBP was holding. This looks like a deliberate move to cut back on borrowing straight from the central bank and stretch out the average time until debt needs to be repaid.
Floating-rate debt covers shorter-term stuff—mostly market treasury bills (MTBs) that mature in three, six, or twelve months. In FY2025, the amount of outstanding MTBs dropped 14.5% to Rs8,756 billion. That fits with the government’s goal of cutting back on short-term borrowing to reduce the constant pressure of having to roll over or refinance loans so frequently.
That pattern carried on into the first quarter of FY2026, when MTBs shrank another 3.4% to Rs8,400 billion by end-September 2025. While shifting away from short-term debt makes the overall risk picture better, it can sometimes mean paying higher interest if longer-term borrowing ends up costing more.
Then there’s unfunded debt, which mostly comes through non-bank channels like National Savings Schemes (NSS). These are run by the Central Directorate of National Savings and remain really popular with regular households looking for safe, decent returns. By June 2025, NSS investments had grown 8.7% year-on-year to Rs3,021 billion, making up almost 6% of total domestic debt. It’s fairly steady, but these schemes tend to pay higher rates, which adds extra strain on the budget.
On the external side, things grew more slowly than domestic borrowing. By June 2025, external debt was up 6% year-on-year to USD 91.8 billion (an extra USD 5 billion). In the first quarter of FY2026 it dipped very slightly—0.4%—to USD 91.4 billion.
Most of the FY2025 increase came from multilateral lenders like the IMF and others; borrowing from them rose 8.7%, adding nearly $4 billion. Another $1.6 billion came from commercial banks, much of it tied to a USD 1 billion loan backed by an Asian Development Bank guarantee.
Looking at who Pakistan owes money to externally: more than half (56%) is to multilateral institutions. Bilateral creditors (including Paris Club countries and certain deposits) make up about 26%. The rest includes international bonds (7%), commercial bank loans (8%), and smaller bits like Naya Pakistan Certificates.
On a positive note, the share of external debt in the total public debt pie actually fell—from 34% in June 2024 to 32% in June 2025—staying comfortably below the 40% limit in the Medium-Term Debt Strategy. Still, this part of the debt is very exposed to rupee fluctuations, so exchange-rate swings can quickly make things more expensive.
At the end of the day, Pakistan’s climbing public debt keeps bringing us back to the same tough trade-off: how do you handle immediate cash needs without sacrificing long-term stability? Moves like paying down SBP debt and trimming short-term borrowing are encouraging signs of better debt handling. But repeatedly ignoring the legal debt ceilings points to much bigger, deeper problems in the system. Unless there are real, lasting improvements in fiscal discipline, much stronger efforts to collect revenue, and genuine respect for the rules that already exist, debt is likely to stay worryingly high. The real test for policymakers isn’t just running debt more smoothly—it’s rebuilding trust in a fiscal system that was supposed to stop this exact situation from happening.