Pakistan continues to operate above its legally mandated debt ceiling, with fresh warnings from the International Monetary Fund that repayment risks could intensify due to high financing needs and long-standing structural weaknesses in the economy.
According to official figures reviewed by the IMF, Pakistan’s public debt has climbed to 72.8 percent of gross domestic product, far exceeding the statutory limit of 60 percent set under national fiscal responsibility laws.
Projections suggest the situation will not improve in the near term, with debt expected to stay above 67 percent in the next fiscal year, keeping the country outside its legal benchmark.
In its latest assessment, the IMF described Pakistan’s debt as manageable over the medium term but stressed that overall risks remain elevated.
The Fund cautioned that the country’s capacity to meet future repayment obligations could come under strain if external financing conditions tighten or reforms lose momentum.
Persistent dependence on domestic bank borrowing, weaknesses in smaller financial institutions, and large external funding requirements were identified as key vulnerabilities amplifying financial risk.
The IMF noted that Pakistan’s repayment outlook is closely tied to continued external support and consistent implementation of reforms. Without sustained policy discipline, shocks from global economic uncertainty or regional instability could quickly reverse recent stabilization gains.
The Fund placed particular emphasis on reforming Pakistan’s tax system, highlighting the need to broaden the tax base and improve revenue collection. It also urged reductions in inefficient government spending and called for institutional restructuring to curb recurring financial losses.
Energy sector reform was singled out as a critical priority, with the IMF warning that unresolved circular debt continues to undermine fiscal stability and external financing efforts.
External pressures remain another major concern. Inflation dynamics, export performance, and foreign exchange reserves were all flagged as vulnerable to global developments, including geopolitical tensions and volatile commodity markets.
The IMF also warned that remittance inflows, a key support for Pakistan’s balance of payments, could face downside risks if instability in the Middle East intensifies.
Despite these challenges, long-term projections offer a cautiously optimistic outlook if reforms stay on track. Debt is expected to gradually decline to 64.7 percent of GDP by 2028 and 61.6 percent by 2029.
Further reductions are projected over the next decade, with debt falling to 56.8 percent by 2033 and reaching 55.7 percent by 2034, a level aligned with the government’s own targets and IMF projections.
For now, however, Pakistan remains well above its legal debt ceiling, underscoring the urgency of structural reforms and sustained economic discipline to reduce fiscal risk and restore long-term stability.
