- EPBD report reveals Pakistan’s debt-to-GDP ratio hits 70.2%, breaching fiscal responsibility act limit
- Says national debt growing at 13% annually, doubling every six years while debt servicing consumes 7.7% of economy
- Report urges to cut policy rate to 9%, saving Rs1.2 trillion in interest payments
ISLAMABAD: Pakistan is facing a dangerous debt trap as its national debt has surged to 70.2 per cent of GDP, well above the 60 per cent ceiling set under the Fiscal Responsibility Act, according to a new report released by the Economic Policy and Business Development (EPBD) think tank.
The report paints a grim picture of the debt burden, revealing that every Pakistani now owes Rs318,252, compared to just Rs90,047 a decade ago — more than a threefold increase in ten years. On average, national debt has been growing by 13 per cent annually, effectively doubling every six years.
Pakistan’s debt burden has risen to Rs 318,252 per citizen—more than tripling from Rs 90,047 just a decade ago, representing a dangerous 13% annual growth rate that doubles the burden every six years. At 70.2% of GDP, Pakistan now carries the second-highest debt-to-GDP ratio… pic.twitter.com/Pz7AGGeSSV
— Economic Policy & Business Development (@EPBDT) September 25, 2025
The debt crisis is not limited to the stock of liabilities. Debt servicing costs have soared, with interest payments now consuming 7.7 per cent of the economy. The steep depreciation of the rupee — a 71 per cent drop since 2020 — has further worsened the outlook, driving up external debt by 88 per cent in local currency terms, the EPBD study noted.
Comparisons with regional peers highlight Pakistan’s precarious position. While India’s debt-to-GDP ratio stands at 57.1 per cent and Bangladesh’s at 36.4 per cent, Sri Lanka faces the highest burden in the region at 96.8 per cent.
The report also cautioned that Pakistan’s limited fiscal space leaves little room for development or infrastructure investment. It argued that simply imposing more taxes on an already overburdened population would not resolve the crisis.
Instead, the think tank recommended broadening the tax net and lowering the policy rate from 11 per cent to 9 per cent. Such a move, it estimated, could save the government Rs1.2 trillion in interest payments, creating fiscal space while also improving the competitiveness of businesses.
The EPBD underscored the urgent need for fiscal discipline and structural reforms, warning that unless Pakistan reduces its cost of borrowing, the country risks sliding into an even deeper economic crisis.
