New Delhi, Feb 6 The Pakistan government’s latest 'Debt Policy Statement 2026' shows that in FY2024-25, the country’s public debt overshot the statutory ceiling by a staggering Rs 16.8 trillion, climbing to 70.7 per cent of GDP against a maximum permissible cap of 56 per cent set by Parliament, according to an article in the Karachi-headquartered Business Recorder.
In other words, public debt exceeded the legal limit by a substantial 14.7 per cent of GDP, demonstrating the government’s continued failure to impose fiscal discipline on itself.
The article points out that “this breach exposes a deep-seated structural flaw in Pakistan’s system of governance: spending first, borrowing more to finance that expenditure and retrofitting justifications later.”
Rules intended to impose fiscal discipline are routinely ignored, with Parliament usually looped in only after ceilings are crossed and the executive facing no immediate consequences for excess. It is clear that the state’s core operating model remains consumption-driven, resistant to reform, overly reliant on debt and indifferent to enhancing the economy’s productive capacity, the article laments.
The cumulative effect of this is that half the federal budget is now swallowed by debt servicing, shrinking space for development spending, hollowing out the PSDP (Public Sector Development Programme) and forcing ever-higher taxes on an already overburdened citizenry.
Domestic debt servicing has emerged as the biggest driver of expenditure growth in the government’s budget over the last three years, crowding out development outlays and starving the economy of the productive investment needed to break the debt trap. Against this bleak backdrop, the finance ministry’s assurances to Parliament ring hollow, the article observes.
Even as it concedes that the debt-to-GDP ratio worsened over the last fiscal year, the Pakistan government maintains that it remains committed to following the Fiscal Responsibility and Debt Limitation (FRDL) Act and promises to reduce public debt to sustainable levels through fiscal consolidation, generating primary surpluses and a gradual reduction in the fiscal deficit.
How this is to be achieved is far from clear, as the 'Fiscal Policy Statement 2026' shows that the federal fiscal deficit also exceeded the parliament-set limit by 2.7 per cent of GDP, underscoring that both core fiscal anchors — debt and deficit — have been breached simultaneously, leaving little credibility in claims of a near-term turnaround, the article states.
Early signs this year aren’t too encouraging. The FBR has already missed its revenue target for the July-January period by Rs 347 billion, even as the government leans more heavily on financial engineering to contain debt pressures, the article added.
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