At the close of 2024, Pakistan’s public debt reached an unprecedented Rs 74 trillion, marking a 10% increase in just six months.This sharp rise has triggered alarm bells across the political and economic spectrum, not merely for its sheer size, but for what it means for the average Pakistani.
As the state grapples with ever-mounting repayments, the resulting pressure is being passed on to citizens through inflation, shrinking social spending, and economic uncertainty.
The debt figure is more than just a number—it’s a sign of a nation struggling to stay afloat.
Pakistan’s debt crisis did not emerge overnight. It is the result of years of borrowing to fund budget deficits, pay for imports, finance infrastructure, and plug gaps in foreign exchange reserves.
This borrowing, while sometimes necessary, has rarely been accompanied by structural reforms or significant revenue generation. The result: a ballooning debt load that now threatens macroeconomic stability. According to the State Bank of Pakistan, total public debt rose from Rs 67.8 trillion in June 2024 to Rs 74.2 trillion by December 2024.This includes both domestic and external liabilities.While a portion of this increase is due to currency devaluation and interest obligations, a significant part is driven by continued fiscal slippages—government spending outpacing revenues. Alarmingly, the government’s interest payments alone now consume over 50% of federal revenues, leaving little fiscal space for development, healthcare, education, or public welfare. One of the most worrying aspects of Pakistan’s debt is its rising dependence on external borrowing. As of the end of 2024, external debt stood at nearly $130 billion.
A large chunk of this debt is owed to multilateral lenders like the IMF, World Bank, and Asian Development Bank, as well as bilateral partners including China and Saudi Arabia.
While these loans often come with relatively lower interest rates, they are not without strings.
Frequent IMF programmes have tied disbursements to painful reforms such as subsidy cuts, tax hikes, and austerity measures. These moves, while intended to stabilise the economy in the long term, often lead to short-term public hardship. More concerning is the growing reliance on commercial debt and Eurobonds, which carry high interest rates and shorter maturities, exacerbating repayment pressure.The weakening of the Pakistani rupee has further worsened the situation.
With the rupee depreciating by more than 20% in 2024, the cost of servicing foreign debt has surged in local currency terms. What may have looked sustainable on paper has quickly become a fiscal nightmare. Debt by itself is not necessarily a problem—many countries carry debt. What makes Pakistan’s situation precarious is the mismatch between debt accumulation and economic productivity. While the debt has soared, GDP growth remains tepid, hovering around 2–3%, far below what is required to create jobs and boost incomes.This disconnect means that more money is being borrowed without a corresponding increase in the capacity to repay.Worse still, inflation—driven by a mix of currency depreciation, global commodity prices, and indirect taxes—continues to erode household purchasing power. In 2024, inflation remained in double digits, hitting food and energy prices the hardest. For ordinary Pakistanis, this translates into tangible hardships. Basic necessities have become unaffordable for large sections of the population. Utility bills have soared, fuel prices are at record highs, and essential medicines are out of reach for many. Wages, meanwhile, have remained stagnant, creating a situation where working families are slipping below the poverty line.Rural areas and low-income urban populations are disproportionately affected, widening inequality. According to some estimates, over 40% of Pakistanis now live below the poverty line, and food insecurity is becoming a chronic problem. The rising debt crisis is also a symptom of Pakistan’s perennial political instability. Successive governments have used borrowing as a short-term fix, preferring populist measures over long-term economic planning. Mega projects with questionable returns, energy deals with unsustainable guarantees, and subsidies that drain public coffers have all contributed to the current predicament. Every change in government brings a shift in economic policy, often reversing the measures taken by the previous administration. This policy inconsistency not only scares off investors but also hampers any sustained effort to rein in the deficit. The lack of political will to broaden the tax base—particularly by taxing the wealthy elite and agricultural sector—means that Pakistan continues to rely on indirect taxes and borrowing to make ends meet. Moreover, the burden of debt is now becoming a political tool.
Parties in opposition blame the ruling coalition for the crisis, while the government blames its predecessors.This blame game has become a recurring theme, distracting from the need for bipartisan consensus on economic reform. If there is one thing the debt crisis has made clear, it is that Pakistan cannot afford business as usual. This moment calls for sober reflection, responsible governance, and above all, national consensus. Economic recovery cannot be the agenda of one party or one government—it must be a shared goal across the political spectrum.Without urgent action, the debt mountain will only grow steeper, and the weight will fall ever more heavily on those least able to bear it.