ISLAMABAD, Oct 23 (Wealth Pakistan): Pakistan’s public debt, which stood at Rs80.5 trillion by the end of June 2025, could decline to below 60 percent of GDP by FY2035 if the government sustains fiscal discipline and introduces coordinated economic reforms, according to an official analysis available with Wealth Pakistan.
The report highlights that maintaining a primary surplus of 1.5 percent of GDP each year could gradually reduce the debt-to-GDP ratio by about 1.5 percentage points annually, enabling Pakistan to achieve the Fiscal Responsibility and Debt Limitation Act (FRDLA) ceiling by FY2035.
Alternatively, even without maintaining a primary surplus, the analysis suggests that the debt ratio could still decline below 60 percent within six years if the average nominal interest rate remains at least three percentage points lower than the nominal GDP growth rate.
For this scenario to hold, real GDP growth would need to average 5 percent annually, with inflation around 8 percent and a stable real interest rate near 2 percent.
The baseline projection, however, shows Pakistan’s public debt remaining between 83 and 87 percent of GDP by FY2035 under current fiscal and monetary trends. The report warns that without corrective fiscal measures, the debt ratio will continue to exceed the FRDLA threshold, posing risks to macroeconomic stability and fiscal sustainability.
According to the analysis, the persistent gap between interest rates and GDP growth, recurring primary fiscal deficits, and exchange rate volatility have historically driven Pakistan’s rising debt trajectory. It emphasizes the need for a medium-term fiscal framework where the Ministry of Finance, the State Bank of Pakistan (SBP), and other institutions align their policies under mutually consistent targets.
“A combination of sustained economic growth, prudent external debt management, and aligned monetary policy could bring Pakistan’s debt ratio to a sustainable level relatively quickly,” the report notes. “However, this outcome hinges on strong institutional coordination and policy consistency.”
It cautions that in the absence of such coordination, “the government will continue to face serious constraints in managing public debt effectively.”
The document concludes that Pakistan must adopt a sequenced and collaborative reform approach where fiscal and monetary policies reinforce each other to restore fiscal sustainability, economic credibility, and investor confidence over the medium term.