Pakistan’s Debt Sees Increase Amid Hopes for a Turnaround Story Next Year
Pakistan’s economy is showing signs of recovery, with the Finance Minister announcing a projected GDP growth of 2.7% for the fiscal year 2024-25. This comes as the country’s total debt has surged to PRs 76,000 billion in the first nine months of the current fiscal year. The economic survey, released ahead of the upcoming budget, highlights both challenges and improvements in various economic indicators, suggesting a cautious optimism for the future.
Debt Levels and Economic Growth
According to the recent economic survey, Pakistan’s total debt has reached PRs 76,000 billion, a significant figure that includes PRs 51,500 billion from domestic banks and PRs 24,500 billion from external borrowing. This increase in debt reflects the financial constraints the country faces as it navigates economic recovery. Finance Minister Muhammad Aurangzeb emphasized that despite these challenges, the economy is on a path to recovery, with GDP growth rebounding from a contraction of -0.2% in 2023 to a projected 2.5% in 2024. The government aims for a growth rate of 2.7% for the upcoming fiscal year, indicating a gradual but steady recovery.
The survey serves as a crucial pre-budget document, outlining the government’s economic achievements and strategies for the fiscal year 2024-25, which begins on July 1. Aurangzeb noted that the recovery is not only a national concern but also reflects global economic trends, with the worldwide GDP growth estimated at 2.8%. This context underscores the importance of sustainable growth strategies as Pakistan seeks to stabilize its economy.
Current Account Surplus and Remittances
During the press briefing, Finance Minister Aurangzeb highlighted positive developments in the current account, which recorded a surplus of $1.9 billion from July to April of FY25. This surplus is attributed to robust IT exports, which amounted to approximately $3.5 billion. The minister expressed optimism about remittances, projecting that they will reach between $37 billion and $38 billion by the end of the fiscal year, a notable increase from $27 billion two years ago. This influx of remittances is vital for bolstering the economy and supporting consumer spending.
The current account surplus and rising remittances are encouraging signs for Pakistan’s economic landscape. They indicate a potential for improved foreign exchange reserves, which are crucial for maintaining economic stability. The government is focusing on leveraging these positive trends to foster a more resilient economy.
Macroeconomic Indicators and Future Outlook
In terms of macroeconomic metrics, the Finance Minister reported that the public debt-to-GDP ratio has improved from 68% to 65%. This reduction is a positive indicator of the government’s efforts to manage debt levels more effectively. Additionally, foreign exchange reserves have increased significantly, reaching $16.64 billion in 2025. The State Bank of Pakistan holds $11.5 billion, while commercial banks possess $5.14 billion. This improvement in reserves is a stark contrast to the previous year when the country had only two weeks’ worth of import coverage.
Looking ahead, Aurangzeb described the upcoming fiscal year as a potential “turnaround story” for Pakistan. He indicated that the budget may be structured to align with International Monetary Fund (IMF) requirements, which could further stabilize the economy. The government’s focus on sustainable growth and adherence to fiscal discipline will be critical as Pakistan aims to navigate its economic challenges and capitalize on emerging opportunities.
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