The finance ministry has admitted that “public debt dynamics remained a key challenge” during the last fiscal year, as the increase in total public debt was “driven mainly by higher interest payments and exchange rate movements”. Photo: file
ISLAMABAD:
The debt burden of every Pakistani increased by 13% to Rs333,000 in the last fiscal year, while public debt remained a “challenge” due to a budget deficit that exceeded the statutory limit by Rs3 trillion, according to a Fiscal Policy Statement presented to Parliament.
Debt per capita increased from Rs294,098 in fiscal year 2023-24 to Rs333,041 in fiscal year 2024-25, the annual Fiscal Policy Statement of the Ministry of Finance stated. Under the Fiscal Responsibility and Debt Limitation Act (FRDL), the ministry is legally bound to submit this statement to Parliament by the end of January for information.
Within a year, the debt burden, which is calculated by dividing total public debt by the country’s 241.5 million population, increased by Rs39,000, or 13%, the report showed.
It added that from June 2024 to June 2025, total public debt increased from Rs71.2 trillion to Rs80.5 trillion, mainly due to higher interest payments. These interest costs, the report noted, were the outcome of additional borrowing undertaken to finance spending beyond the limits set in law.
Unlike the United States, where the government can come to a standstill for breaching the debt ceiling until it is revised by the Congress, in Pakistan parliamentarians are only informed of such breaches, without any consequences for the federal government.
Fiscal year 2024-25 was the first full financial year of the government led by Prime Minister Shehbaz Sharif, which assumed office in April 2024.
The finance ministry said total public debt as a percentage of GDP increased from 67.6% in June 2024 to 70.7% in June 2025.
The rise in public debt, both in absolute terms and relative to the size of the economy, undermines the federal government’s claim of fiscal discipline. During the year, the government added new departments, expanded the federal cabinet and purchased new furniture and cars despite claiming austerity.
The law requires the federal government to lay a fiscal policy statement before the National Assembly by the end of January each year. The statement must comprehensively assess key fiscal indicators, including total expenditure, net revenue receipts, fiscal deficit, federal fiscal deficit excluding foreign grants, public debt and per capita debt.
The finance ministry has admitted in the report that “public debt dynamics remained a key challenge” during the last fiscal year, as the increase in total public debt was “driven mainly by higher interest payments and exchange rate movements”.
It said the government’s medium-term debt management strategy continues to focus on reducing gross financing needs, extending maturity profiles and diversifying financing instruments to ensure sustainability.
For fiscal year 2024-25, total federal expenditure was budgeted at Rs18.9 trillion, including current expenditure of Rs17.2 trillion, the ministry said.
The statement further revealed that the federal government spent Rs3.1 trillion, or 2.7% of GDP, over and above the 3.5% federal fiscal deficit limit set by Parliament.
The report stated that the federal fiscal deficit was recorded at 6.2% of GDP, whereas under the Fiscal Responsibility and Debt Limitation Act it should not have exceeded 3.5% of GDP. “Limiting the federal fiscal deficit excluding foreign grants to 4% of GDP during the three years beginning from financial year 2017-18, and maintaining it at a maximum of 3.5% of gross domestic product thereafter, states the law.
Revenue collection remained close to budget targets, while expenditures slightly surpassed their budgeted levels, said the ministry.
On the fiscal front, the overall balance improved relative to budget estimates due to provincial cash surpluses, central bank profits and petroleum levy collection.
The total fiscal deficit, including provincial accounts, was contained at 5.4% of GDP, significantly lower than the budgeted 5.9%, mainly because of lower interest payments following a policy rate cut by the central bank during the year.
In terms of revenues, the finance ministry said, “performance remained varied”. Tax revenues stood at Rs11.7 trillion against a budgeted target of Rs13 trillion, reflecting 90.5% realisation.
Non-tax revenues exceeded expectations, reaching Rs5.1 trillion, or 104% of the budgeted amount, primarily due to higher-than-anticipated SBP profits and petroleum levy receipts.
During the last fiscal year, budgeted current expenditure was Rs17.2 trillion, while actual spending stood at Rs15.8 trillion as interest payments remained below allocations. Development expenditure, including net lending, was budgeted at Rs1.7 trillion, but actual spending was Rs1.4 trillion, equivalent to 84% of the allocation.
Defence expenditure was budgeted at Rs2.1 trillion, while actual expenses stood close to Rs2.2 trillion, representing 103% of the allocated budget, according to the report.
Interest payments totalled Rs8.8 trillion against the budgeted Rs9.8 trillion, reflecting 91% utilisation. Subsidies amounted to Rs1.3 trillion compared with an allocation of Rs1.36 trillion, or 95.2% utilisation, while pension payments stood at Rs911 billion against a budgeted Rs1 trillion.
