Surging domestic borrowing and missed tax targets push federal debt to new highs, raising concerns over fiscal sustainability.
Key Takeaways
1. Record Debt: Pakistan’s federal government debt has reached an all-time high of nearly Rs75 trillion by April 2025.
2. Revenue Shortfall: Despite improved tax collection, the FBR missed its target by Rs1 trillion, fueling further borrowing.
3. Fiscal Challenges: The SBP warns that without significant tax reforms, meeting fiscal targets will remain difficult.
Karachi, Pakistan – Pakistan’s federal government debt has soared to an unprecedented Rs74.9 trillion by the end of April 2025, according to the latest data released by the State Bank of Pakistan (SBP). The staggering increase of over Rs6 trillion in just ten months underscores the mounting fiscal pressures facing the country as it struggles to bridge its budget deficit.
The SBP report reveals a 9% rise in the government’s total debt stock since June 2024, with domestic borrowing accounting for the lion’s share of the increase. Domestic debt climbed by 11.37%, reaching Rs52.5 trillion, while external debt edged up to Rs22.4 trillion. The surge in borrowing is largely attributed to the government’s need to finance persistent budget shortfalls amid sluggish economic growth and lower imports.
Despite a 26% improvement in tax collection by the Federal Board of Revenue (FBR) compared to last year, the FBR fell short of its target by nearly Rs1 trillion, collecting Rs10.23 trillion against a goal of Rs11.24 trillion for July-May FY25. Analysts note that this revenue gap has forced the government to rely heavily on both domestic and external borrowing.
The SBP has warned that achieving the government’s primary balance target will remain a significant challenge unless there is a sharp acceleration in tax revenue growth. The persistent rise in debt not only raises concerns about Pakistan’s fiscal sustainability but also puts additional pressure on policymakers to implement structural reforms and broaden the tax base.
For Pakistan’s economy, already grappling with inflation and currency pressures, the ballooning debt stock is a stark reminder of the urgent need for fiscal discipline and more robust revenue generation.
