I’ll be honest: Pakistan’s debt numbers don’t just look unsustainable—they feel detached from reality. Yet they show up, quietly and persistently, in the price of roti, electricity, and fuel. Ignore them, and they still collect from you.

The illusion of control

By March 2025, Pakistan’s public debt had reached Rs 76 trillion. That figure is so large it almost loses meaning—until you realise we are paying for it every single day. Officials point to a debt-to-GDP ratio of around 65 percent as a sign of improvement. That comfort is misleading. It’s inflation doing the heavy lifting, not reform.

Strip away the optics, and one fact remains: we are borrowing faster than we are fixing.

A budget that tells the truth

Budgets, unlike speeches, don’t lie. This year, nearly half of government spending—Rs 8.2 trillion—goes straight to interest payments. Not hospitals. Not schools. Not infrastructure. Just the cost of yesterday’s decisions.

Defence takes another large share, understandably in a tense region. But what’s left for actual development is almost symbolic—about six paisa per rupee. At that point, calling it “development spending” feels generous.

We are not investing in the future. We are servicing the past.

How we normalised dysfunction

This crisis didn’t arrive overnight. It was built, year by year, through choices we’ve come to accept as normal.

Running persistent deficits has become routine, as if borrowing to fund everyday expenses carries no consequence. External shocks—floods, commodity spikes—made things worse, but they didn’t create the underlying fragility.

Then there’s the quiet crowding-out of the private sector. When 60 percent of bank assets sit in government securities, businesses don’t just struggle—they stall. Growth slows, tax revenues shrink, and the cycle tightens.

And through it all, we’ve prioritised short-term stability over long-term reform.

The rollover gamble

Pakistan’s external repayments tell their own story: US $26 billion paid in 2025, with another US $24 billion due this fiscal year. Much of this depends on friendly countries rolling over deposits.

But let’s be clear—rollovers are not a strategy. They are a pause button.

At some point, “usually” becomes “not this time.”

 

 

The IMF reality check

Pakistan’s relationship with the IMF has become almost ritualistic. Programme, tranche, temporary relief—repeat. The latest deals have stabilised the rupee and reassured creditors, but they haven’t changed the fundamentals.

Borrowing to repay old debt isn’t recovery. It’s maintenance.

Markets aren’t convinced

Ratings upgrades and “positive outlooks” make for good headlines, but investors are still demanding punishing yields—around 12 percent on Eurobonds. That’s not confidence; that’s caution priced in.

The message is simple: show us real reform, not incremental adjustments.

The part we don’t talk about enough

Domestic debt is the quieter, more dangerous problem. It doesn’t trigger headlines, but it reshapes the economy from within.

High interest rates reward banks for lending to the government instead of businesses. Entrepreneurs are priced out. Expansion plans die early. Productivity stalls.

When a small manufacturer is quoted nearly 20 percent for a loan, the system isn’t just inefficient—it’s self-defeating.

A budget caught between politics and reality

The government promises fiscal discipline, targeting a deficit of 5.6 percent of GDP. Yet it simultaneously expands subsidies and raises salaries.

This isn’t reform—it’s compromise. And markets, like creditors, can tell the difference.

The uncomfortable question: restructuring

Officially, restructuring is off the table. Unofficially, it’s the risk no one wants to name.

The IMF’s projections rely on a near-perfect alignment: low oil prices, strong remittances, and stable climate conditions. That’s not a plan—it’s optimism.

Extending debt maturities, especially with bilateral partners, may soon shift from unlikely to unavoidable.

What real reform would actually look like

We don’t lack solutions. We lack follow-through.

• Price energy honestly, then protect the poorest directly.

• Expand the tax base instead of overburdening the compliant minority.

• Break the bank-government dependency so credit flows to businesses.

• Invest in climate resilience before the next disaster resets the economy.

None of this is politically easy. That’s precisely why it matters.

Betting on people, not just policy

There is, however, one underused lever: people.

Programmes like UPG Biashara don’t grab headlines, but they target the real constraint—too few productive, export-oriented businesses. Skills training, small grants, and global networks won’t solve the debt crisis overnight. But they do something more important: they expand the base of those who create value.

And that’s the only durable way out.

Stop calling survival a strategy

Pakistan has become adept at avoiding default—just barely. But narrowly escaping crisis is not success. It’s delay.

At some point, the country has to choose: continue managing decline, or confront it.

Because the real cost of this crisis isn’t measured in trillions. It’s measured in missed opportunities, stalled businesses, and a generation that pays more but gets less.

And that bill, unlike our debt, cannot be rolled over.