Pakistan’s domestic debt has hit an all-time high, crossing Rs54.47 trillion as of June 2025, reflecting a massive increase of over Rs28 trillion within just five years. The surge underscores the country’s growing reliance on internal borrowing to bridge fiscal gaps and finance its expanding budgetary needs.
According to official data released by the Ministry of Finance, the total domestic debt stood at Rs26.26 trillion in June 2021. Since then, the debt burden has more than doubled, signaling deepening fiscal pressures and highlighting structural weaknesses in revenue generation and expenditure management.
The ministry’s report reveals that Pakistan’s annual debt repayments and interest obligations have also reached record levels. As of June 2025, principal repayments amounted to Rs25.09 trillion, while interest payments soared to Rs7.96 trillion, showing an increase of more than Rs800 billion compared to the previous year.
In contrast, the annual interest payment stood at Rs7.16 trillion in June 2024, Rs4.93 trillion in 2023, and Rs2.52 trillion in 2021, illustrating a rapid escalation in the cost of domestic borrowing. Analysts warn that this trend poses long-term risks to fiscal sustainability and limits the government’s ability to allocate resources toward development projects.
Economic experts attribute the rising domestic debt to persistent fiscal deficits, high policy rates, and increased government borrowing from local banks to finance ongoing expenditures. The continuous depreciation of the rupee, coupled with low tax revenues and rising inflation, has further compounded the debt servicing burden.
They emphasize that without significant reforms in revenue mobilization, expenditure rationalization, and state-owned enterprise restructuring, Pakistan’s debt trajectory could continue to spiral upward, leaving little room for fiscal maneuvering.
The government, meanwhile, maintains that domestic borrowing remains a crucial tool for managing short-term liquidity and fulfilling budgetary commitments. However, economists stress the need for a sustainable debt management strategy to avoid further escalation in interest obligations, which now consume a large portion of the federal budget.
As the country prepares for upcoming IMF review meetings and fiscal policy evaluations, financial experts urge a stronger focus on debt restructuring, tax reform, and fiscal discipline to prevent the domestic debt burden from reaching unsustainable levels.