12.3% Annual Increase Driven by Domestic Borrowing and Long-Term Bonds
Pakistan’s central government debt rose to Rs76.05 trillion by the end of May 2025, according to the State Bank of Pakistan (SBP). This marks a 12.3% increase over the previous year, when the debt was Rs67.73 trillion in May 2024.
In its latest debt bulletin, the SBP reported a yearly increase of more than Rs8.31 trillion in the government’s total borrowing. This significant rise underlines the growing reliance on domestic borrowing and long-term financial instruments.
Domestic Borrowing Sees Sharp Growth
The data shows that domestic debt reached Rs53.46 trillion, rising 15.9% compared to May 2024. Meanwhile, external debt stood at Rs22.59 trillion, up 4.52% year-on-year.
The larger increase in domestic debt suggests that the government preferred borrowing from local sources, possibly due to limited access to foreign financing and high global lending rates.
Monthly Debt Growth Exceeds Rs1 Trillion
Between April and May 2025, the central government debt expanded by Rs1.11 trillion. This monthly increase surpassed the Rs1.035 trillion rise recorded during the same period last year.
Despite repeated government claims of fiscal responsibility, the data indicates a consistent pattern of monthly borrowing to meet budgetary requirements.
Total Debt and Liabilities Near Rs90 Trillion
In an earlier report released in May, the SBP stated that Pakistan’s total debt and liabilities reached Rs89.83 trillion by the end of March 2025.
This broader figure includes not only central government borrowing but also external liabilities, public sector enterprise debt, and other financial obligations, highlighting the overall burden on Pakistan’s economy.
Long-Term Bonds Lead the Borrowing Mix
The SBP noted a substantial increase in Pakistan Investment Bonds (PIBs), which contributed Rs35.24 trillion to the public debt by May 2025. This represents a significant rise from Rs27.70 trillion in May 2024.
In contrast, borrowing through market treasury bills (MTBs) fell to Rs8.04 trillion, down from Rs9.44 trillion a year earlier. This shift reflects the government’s growing preference for long-term borrowing options to manage maturity risks.
Shift from Short-Term to Long-Term Debt
Earlier SBP data confirmed that the government increasingly relied on PIBs instead of short-term instruments. This trend indicates a strategy aimed at reducing refinancing pressure by extending the debt maturity profile.
However, long-term borrowing typically carries higher interest rates, potentially increasing the cost of debt servicing over time.
Government Claims Rs850 Billion Savings
Finance Minister Muhammad Aurangzeb claimed the government saved Rs850 billion through debt refinancing strategies in the ongoing fiscal year.
While this measure temporarily eases financial pressure, experts warn that the growing volume of debt—especially through expensive long-term instruments—could offset these savings in the future.
Year-on-Year Domestic Debt Spike
Between April and May 2025 alone, domestic debt jumped from Rs52.52 trillion to Rs53.46 trillion, an increase of Rs0.94 trillion.
Compared to June 2024, when domestic debt stood at Rs47.16 trillion, the overall increase reached Rs6.3 trillion, indicating a 13.3% jump in just 11 months.
Nine-Month Debt Trend Shows Steady Climb
During the first nine months of fiscal year 2024–25 (July–March), domestic debt rose by Rs4.8 trillion. This growth resulted primarily from increased use of long-term bonds like PIBs, while short-term borrowings and other sources saw a decline.
The strategy points to the government’s attempt to stabilize its debt profile, but it continues to raise concerns about long-term financial sustainability.
Challenges Ahead for Fiscal Management
The rapid rise in Pakistan’s central government debt poses serious questions about fiscal discipline and economic planning. As debt servicing costs grow, the government faces limited room for development spending or public investment.
Experts argue that without substantial reforms in taxation, energy pricing, and state-owned enterprises, Pakistan’s debt will continue to climb, worsening its fiscal deficit.
External Pressures and IMF Oversight
Pakistan remains under the watch of the International Monetary Fund (IMF), which closely monitors its fiscal indicators. Any future agreements or loan programs will likely include tough conditions aimed at curbing borrowing and improving revenue collection.
With elections on the horizon and rising oil prices affecting the budget, the government’s ability to maintain fiscal control is under serious pressure.
Conclusion: Debt Growth Demands Urgent Reform
Pakistan’s central government debt hitting Rs76.05 trillion reflects a deep-rooted reliance on borrowing and exposes vulnerabilities in the country’s financial system.
Although the shift to long-term debt instruments like PIBs offers some breathing room, the sheer volume of debt and rising interest payments point to the urgent need for structural reforms and prudent fiscal policies.
Without timely corrective measures, the country may face increasing economic instability and reduced investor confidence in the years to come.
This ballooning debt raises alarms for future generations, as rising interest payments could choke development spending. Without urgent reforms in taxation, expenditure control, and governance, Pakistan risks falling into a deeper debt trap. Experts warn that time is running out to implement meaningful fiscal discipline and restore economic stability.
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