Pakistan's federal government debt has ballooned by 75 per cent over the past four years, reaching Rs 83.6 trillion by the end of June 2026, even as revenues more than doubled and the country underwent repeated fiscal tightening under International Monetary Fund (IMF)-backed programmes, according to a report citing data from the State Bank of Pakistan (SBP). The figures, reported by The Express Tribune, exclude IMF borrowings and certain other liabilities held on the central bank's balance sheet.

Scale of the Debt Build-Up

The federal debt stock rose by Rs 35.8 trillion compared with June 2022, when the Pakistan Democratic Movement (PDM)-led government presented its first budget after assuming power. In the most recent fiscal year alone, federal debt climbed by Rs 5.8 trillion, or 7.3 per cent. This trajectory has continued despite a 107 per cent jump in the federal government's gross revenues over the same four-year period — a doubling of income that has still failed to contain the debt spiral.

Where the Money Goes

The central structural problem is debt servicing. Interest payments alone consume between 42 per cent and 50 per cent of Pakistan's annual budget, according to the report. For the current fiscal year, more than Rs 8 trillion has been allocated for debt servicing, while a further Rs 8.8 trillion is earmarked for transfers to provinces under the National Finance Commission (NFC) arrangement. Together, these two heads account for the overwhelming share of federal expenditure, leaving negligible fiscal space for development spending or productive sectors.

Domestic and External Debt Breakdown

Within the overall debt pile, domestic debt rose 9.1 per cent year-on-year to Rs 59.5 trillion in June 2026, while external debt stood at Rs 24.2 trillion. The growing reliance on domestic borrowing raises its own risks — crowding out private credit and sustaining elevated interest rates that further inflate future servicing costs. This is the classic debt trap dynamic: higher borrowing begets higher interest costs, which in turn necessitate more borrowing.

Fiscal Tightening Has Not Been Enough

Pakistan has been under IMF programme conditionality for much of this period, implementing subsidy cuts, tax hikes, and exchange rate adjustments. Critics argue that while these measures have improved revenue collection, they have not addressed the structural expenditure rigidity — chiefly, the debt-servicing burden — that keeps deficits entrenched. Rising government expenditure and continued fiscal deficits have eroded the gains from stronger revenues, according to the report.

Outlook and Sustainability Concerns

The growing reliance on debt and persistently high financing needs have intensified concerns over Pakistan's long-term fiscal and debt sustainability, the report noted. With interest payments consuming nearly half the budget and development allocations squeezed, the space for growth-enabling investment remains critically narrow. How Islamabad navigates its next IMF review — and whether it can structurally reduce its debt-servicing-to-revenue ratio — will determine whether the trajectory begins to stabilise.