Analysts Warn of Unsustainable Borrowing and Potential Financial Instability
Key Takeaways:
i) Pakistan’s federal government debt reached a record high of Rs 73,688 billion in March 2025, according to the State Bank of Pakistan (SBP).
ii) The debt increased by 12.7% compared to March 2024, with domestic debt rising significantly.
iii) Experts express concern over Pakistan’s growing reliance on loans, warning of potential difficulties in managing the budget and repaying debts.
Karachi, Pakistan – New data released by the State Bank of Pakistan (SBP) reveals that Pakistan’s federal government debt has surged to a record high of Rs 73,688 billion in March. This represents a substantial increase compared to both the previous month and the corresponding period last year.
The central bank’s report for March 2025 indicates a 12.7% rise in federal debt compared to March 2024, when it stood at Rs 65.38 trillion. In a single month, the debt grew by 0.9%, adding Rs 652 billion. A significant portion of this increase is attributed to domestic debt, which witnessed an 18.6% annual increase, reaching Rs 51.52 trillion. External debt also saw a slight uptick, reaching Rs 22.17 trillion.
While the SBP noted a shift towards long-term debt management by the government, economic experts are raising concerns about the sustainability of this borrowing trend. They caution that Pakistan’s increasing dependence on loans could complicate budget management and debt repayment. Without significant economic reforms, this borrowing could lead to further financial instability for the nation.
The Asian Development Bank (ADB) projects a 2.5% growth for Pakistan’s GDP in fiscal year 2025, contingent on the successful implementation of ongoing reforms. However, the IMF has downgraded Pakistan’s GDP growth outlook for 2025 to 3%, highlighting the ongoing economic challenges.
