The State Bank of Pakistan has recently released estimates of the stock of debt of the country as of the end of 2024-25. The total debt is estimated at Rs 95,832 billion, equivalent to 83.6 percent of the GDP.

The public debt, both domestic and external, adds up Rs 80,518 billion, implying the dominant share in total debt of 84 percent. The public debt to GDP ratio stands at 70.2 percent of the GDP.

The burden of public debt per capita in Pakistan now is Rs 318,252. A decade ago, it was Rs 90,047 per person. Therefore, the burden has risen rapidly, with an annual growth rate of almost 13 percent, implying a doubling of the burden every six years.

The overall quantum of public debt has also shown a tendency to rise as a percentage of the GDP. Fifteen years ago, in 2009-10, it was 54.6 percent of the GDP, rising to 57.1 percent by 2014-15 and to the all-time peak of 76.6 percent in 2019-20. It declined sharply to 67.8 percent of the GDP in 2023-24, but has risen again beyond 70 percent of the GDP in 2024-25.

The composition of public debt has also changed significantly. The share of external debt was 40.7 percent in 2009-10. It was falling up to 2014-15, reaching a low of 29.8 percent. However, the share of external debt has been rising since then and now stands at 32.3 percent.

A comparison can be made of the level of public debt as a percentage of the GDP, currently at 70.2 percent in Pakistan, with selected Asian countries. The lowest level of public debt is in Bangladesh at 36.4 percent of the GDP. The highest level is observed in Sri Lanka at 96.8 percent of the GDP. In India, the ratio is 57.1 percent of the GDP, while in Indonesia and Thailand it is 40.2 percent and 61.1 percent of the GDP, respectively.

The fundamental question is what factors contribute to the evolution of the public debt to GDP ratio? Clearly, the key determinant is the size of the federal budget deficit as a........

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