ISLAMABAD: Pakistan’s public debt has breached the statutory ceiling by Rs17 trillion, reaching 70.7% of GDP against the maximum permissible limit of 56%, according to the Debt Policy Statement 2026 presented to the National Assembly under the Fiscal Responsibility and Debt Limitation Act (FRDLA).

The report revealed that public debt stood Rs16.8 trillion higher than the FRDL law’s threshold for fiscal year 2024–25. With debt consuming nearly half of the annual budget, the government faces mounting challenges in financing development and easing the tax burden on already strained households.

The Federal Board of Revenue (FBR) has compounded fiscal pressures by missing its revised targets. Between July and January, FBR collected Rs7.174 trillion, falling short by Rs347 billion. Revenue growth of 10.5% over last year remains far below the pace required to meet annual goals, despite gains from a favourable super tax ruling.

The Ministry of Finance acknowledged the rising debt-to-GDP ratio but assured Parliament of its commitment to fiscal consolidation. Officials outlined plans to generate primary surpluses, narrow the fiscal deficit, and place debt on a sustainable path. The Fiscal Policy Statement 2026, however, showed the federal deficit exceeded the prudent limit by 2.7% of GDP.

To manage risks, the government has shifted toward longer-term borrowing. The share of short-term Market Treasury Bills fell from 24% in June 2024 to 16.6% by June 2025, raising the average maturity of domestic securities from 2.8 years to 3.8 years. Authorities increased issuance of Pakistan Investment Bonds and Sukuk instruments, taking advantage of lower interest rates.

External debt maturity declined slightly to 6.1 years due to higher reliance on commercial loans, which rose from $5.5 billion to $7.2 billion. Overall external debt climbed 6% to $91.8 billion, driven largely by multilateral partners including the IMF, which added $4.3 billion.

As of June 2025, total public debt stood at Rs80 trillion, up 13% year-on-year. Domestic debt accounted for Rs54.4 trillion, while external debt reached Rs26.1 trillion. Multilateral and bilateral lenders provided 84% of external financing, with bilateral partners such as the Paris Club and country deposits making up 26%.

The government’s debt management strategy now emphasizes maturity lengthening, fixed-rate instruments, diversification of investors, and access to international markets through initiatives such as Panda bonds.

This breach of the debt ceiling underscores the urgency of fiscal reforms, as rising obligations continue to crowd out productive spending and weigh heavily on Pakistan’s economic stability.