The International Monetary Fund (IMF) has predicted an increase in Pakistan’s external debt, which will reach $126.731 billion in fiscal year 2025-26, up from $123.338 billion in fiscal year 2024-25.
The IMF report states that Pakistan’s external debt will further rise to $131.688 billion in fiscal year 2026-27. The ratio of external debt to GDP is expected to remain at 30.3% for fiscal year 2024-25, compared to 32.2% in fiscal year 2023-24. However, this ratio will increase again to 30.8% in fiscal year 2025-26.
Pakistan’s domestic debt is forecasted to be Rs. 60.861 trillion for fiscal year 2025-26 and Rs. 65.629 trillion for fiscal year 2026-27, while it was Rs. 54.567 trillion in fiscal year 2024-25.
Although progress is ongoing regarding fiscal consolidation and the extension of domestic debt maturities, short-term risks remain high due to Pakistan’s large gross financing needs and past challenges in securing external financial assistance.
The IMF stated that the gross financing needs, although slightly reduced compared to the time of the EFF request, still pose serious risks to debt sustainability, especially when financial and foreign exchange reserves are very low.
The IMF further stated that in this regard, timely provision of bilateral and multilateral financial support is very important. Prolonged high interest rates, tight financial policies slowing down the economy, new pressures on the exchange rate, potential policy changes, and contingent liabilities related to public sector enterprises are major risks to debt sustainability.
