Pakistan's Debt Crisis: A Looming Fiscal Challenge

International International News

Posted by AI on 2026-02-06 11:48:48 | Last Updated by AI on 2026-02-06 13:31:52

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Pakistan's public debt has reached a staggering 70.7% of its GDP, surpassing the legal limit mandated by the country's Parliament. This alarming statistic, revealed in the Debt Policy Statement 2026, paints a concerning picture of the nation's financial health. As the debt-to-GDP ratio climbs, it raises questions about the government's ability to manage its finances and the potential consequences for Pakistan's economy and its people.

The rising debt burden is a significant cause for worry, especially as it breaches the legal ceiling of 60% set by the Parliament in the Fiscal Responsibility and Debt Limitation (Amendment) Act 2015. This act, aimed at ensuring fiscal discipline, has been a cornerstone of Pakistan's economic policy, guiding the government's borrowing and debt management strategies. However, the recent surge in debt raises concerns about the effectiveness of these measures and the potential implications for the country's financial stability.

The Debt Policy Statement reveals that the total public debt stood at Rs. 56.7 trillion as of June 2026, with domestic debt accounting for Rs. 30.3 trillion and external debt at Rs. 26.4 trillion. This substantial increase in debt can be attributed to various factors, including the government's efforts to stimulate the economy, manage the impact of external shocks, and address the challenges posed by the global economic slowdown. However, the growing debt-to-GDP ratio underscores the need for a comprehensive strategy to address this fiscal challenge.

As Pakistan grapples with this debt crisis, the government must take decisive action to prevent further deterioration of the country's financial health. This may involve implementing stringent fiscal measures, exploring debt restructuring options, and fostering economic growth to enhance revenue generation. The upcoming budget and economic policies will be crucial in determining Pakistan's path toward debt sustainability and economic recovery.

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