Pakistan’s Debt Burden Increases to Over Rs302,000 Per Person
In a recent study, it was revealed that Pakistan’s per-person debt has surged to nearly Rs302,000 by the end of the last fiscal year. This concerning increase in individual debt has raised alarms among financial experts and policymakers alike. The government’s inability to contain the budget deficit within the legal limits has further exacerbated the economic challenges facing the country.
The Fiscal Policy Statement-2025, released on Tuesday, highlighted that the budget deficit in the last fiscal year exceeded the legal limit by over double, reaching a staggering Rs4 trillion. This significant deviation from the prescribed limit set by the Parliament underscores the pressing need for effective fiscal management and debt control measures.
Escalating Debt Burden
According to the Finance Ministry’s Fiscal Policy Statement, the per capita debt burden surged from Rs271,264 in fiscal year 2023 to Rs301,954 in fiscal year 2024, representing an 11.3% increase. This sharp rise in individual debt underscores the challenges facing the economy and the urgent need for sustainable financial practices to avert a full-blown crisis.
Legal Violations and Fiscal Mismanagement
The government’s failure to adhere to the legal requirement of restricting the federal budget deficit to 3.5% of the Gross Domestic Product (GDP) is a clear violation of the Fiscal Responsibility and Debt Limitation Act of 2005. The Fiscal Policy Statement revealed that the deficit soared to Rs7.7 trillion or 7.3% of the GDP, significantly higher than the budget target and legal limits.
Economic Impact and Policy Implications
The report highlighted that the total public debt escalated by nearly 15% in the last fiscal year, reaching Rs72.3 trillion. This increase was attributed to higher interest payments on debt and exchange rate fluctuations. Despite the rise in debt, the total public debt relative to the size of the economy decreased from 74.8% to 67.2%, offering a nuanced perspective on the country’s financial health.
In conclusion, the escalating debt burden and widening budget deficit pose significant challenges to Pakistan’s economic stability. Addressing these pressing issues requires a comprehensive approach that combines fiscal prudence, debt management, and sustainable economic policies to steer the country towards financial resilience and long-term prosperity.
