Pakistan’s Federal Debt Rises 75% in Four Years Under Shehbaz Sharif Government

ISLAMABAD: Pakistan’s federal government direct debt has surged to Rs83.6 trillion by June 2026, increasing by Rs5.8 trillion, or 7.3 percent, in a single year, according to a report by The Express Tribune citing State Bank of Pakistan data.

The report said the federal government’s direct debt stood at around Rs77.8 trillion at the end of June 2025. Over the past four years, the debt has increased by Rs35.8 trillion, representing an overall rise of nearly 75 percent compared with June 2022.

The State Bank’s latest Debt Bulletin for fiscal year 2025-26 does not include certain loans obtained from the International Monetary Fund (IMF) and some bilateral lenders that are reflected on the central bank’s balance sheet. The complete picture of Pakistan’s public debt is expected to emerge after the State Bank releases comprehensive public debt figures.

Domestic Debt Rises by Rs5 Trillion

According to the data, the federal government’s domestic debt increased from Rs54.5 trillion in June 2025 to Rs59.5 trillion in June 2026, registering an increase of Rs5 trillion, or 9.1 percent, in one year.

Meanwhile, external debt rose from Rs23.4 trillion to Rs24.2 trillion, an increase of Rs783 billion during the same period.

The relatively slower increase in external debt was attributed partly to the improvement in the rupee’s value against the US dollar and other foreign currencies during the financial year.

Debt Servicing Remains a Major Challenge

Pakistan has remained under various IMF programmes during the period, while the government has increased revenue collection through higher taxes and levies on several sectors, including petroleum products, salaried individuals, real estate and the corporate sector.

At the same time, government expenditure has remained high because of rising debt-servicing costs, continued financing of social protection programmes, federal spending on certain devolved areas and development projects of a provincial nature.

The report said government revenue, before transfers to provinces, increased by 107 percent over four years, while government expenditure rose by 66 percent. Despite the increase in revenue, the government’s debt continued to expand significantly.

Debt servicing is consuming a substantial share of the federal budget, with estimates indicating that around 42 to 50 percent of budgetary resources are being used for interest payments.

عمران خان حکومت جانے کے بعد قرض میں 75% اضافہ ہوا، شہباز دور میں ملکی قرض 83 ہزار 600 ارب تک پہنچ گیا، صرف ایک سال میں 5800 ارب روپے قرض بڑھا، (IMF اور کچھ دوسرے ممالک سے لیا قرض شامل نہیں)۔ ایکسپریس ٹربیون

ابھی ترقی ہو رہی ہےhttps://t.co/r9CEKp6mAg

— Ahmad Warraich (@ahmadwaraichh) August 12, 2026

Legal Debt-Reduction Target

Under the Fiscal Responsibility and Debt Limitation Act, the government is required to reduce the debt-to-GDP ratio by between 0.5 and 0.75 percentage points annually and bring it down to 50 percent by 2032-33.

However, the report noted that the current government, like its predecessors, has not fully met the statutory debt-reduction targets.

The high level of public debt is also limiting the government’s fiscal space for spending on productive sectors of the economy.

Short-Term External Borrowing Raises Concerns

The report noted that although much of Pakistan’s external debt has been obtained from bilateral and multilateral sources on concessional terms, the growing share of short-term borrowing in recent years remains a concern.

Short-term debt increases refinancing risks and adds to the government’s overall financing requirements.

The government has allocated more than Rs8 trillion for debt servicing during the current fiscal year, while Rs8.8 trillion is expected to be transferred to the provinces under the National Finance Commission (NFC) arrangements.

The figures highlight continued pressure on Pakistan’s fiscal position despite claims of increased investment and improved economic stability. Further assessment of the country’s debt sustainability will become possible once the State Bank publishes the complete public debt figures.