At the close of 2024, Pakistan’s public debt crossed a historic Rs74 trillion, according to a debt bulletin by the Finance Ministry, meaning that in just six months, we borrowed 10 per cent more than we already had. These are numbers that belong in balance sheets but their impact is anything but abstract. A child out of school or a business shuttered because credit dried up.
About two-thirds of this debt is domestic. That means we’re borrowing heavily from within: banks, pension funds, and savings institutions.
On the face of it, domestic borrowing insulates us from volatile international markets. But it also means we’re crowding out private investment and directing more of our limited resources toward interest payments, rather than toward roads, energy, or education. The other third – our external debt – keeps us at the mercy of exchange rate shocks and the decisions of rating agencies and lenders in Washington and Beijing.
And yet, there are glimmers – however faint – of better management. The government posted a primary surplus of 2.9 percent of GDP. The rupee has shown signs of stability. Global rating agencies like Fitch and Moody’s have softened their outlook. For once, Pakistan is not in immediate danger of default.
But let’s not confuse survival with success.
This apparent fiscal discipline has come at a high cost: slashed development budgets, rising indirect taxes, and a squeeze on middle- and low-income households already reeling from inflation. Behind every positive number is a very human tradeoff. The real issue isn’t debt alone. It’s the economy’s inability to grow in ways that include the many, not just the few. It’s the chronic under-taxation of powerful sectors.
Debt is not inherently bad. What matters is what we do with it. Are we borrowing to build, to educate, and to generate long-term productivity? Or are we just buying time?
Pakistan doesn’t just need belt-tightening. It needs boldness. And it needs leadership that treats debt not as a storm to ride out, but as a wake-up call to finally change course. *