Pakistan is facing a severe debt crisis, with over $23 billion in external payments due in the fiscal year 2025-26, which began on July 1.

According to the Pakistan Economic Survey 2024-25, the country’s total public debt stood at Rs 76.01 trillion at the end of March 2025, comprising Rs 51.52 trillion ($180 billion) in domestic debt and Rs 24.49 trillion ($87.4 billion) in external debt.

Of the $23 billion external debt due this fiscal year, approximately $12 billion consists of temporary deposits from friendly countries—notably, $5 billion from Saudi Arabia, $4 billion from China, $2 billion from the UAE, and $1 billion from Qatar. There is a strong expectation that these deposits will be rolled over. However, if these rollovers do not occur, Pakistan would be obligated to make full repayments, raising the risk of a potential default.

The remaining $11 billion in external debt servicing for the year pertains to commitments to multilateral and bilateral creditors, international bondholders, and commercial lenders. Major components include:

$1.7 billion in two maturing Eurobonds
$2.3 billion in commercial loans
$2.8 billion in repayments to multilateral agencies such as the World Bank, Asian Development Bank, Islamic Development Bank, and Asian Infrastructure Investment Bank
$1.8 billion in bilateral loans.

Despite assertions by Prime Minister Shehbaz Sharif’s government of an economic turnaround, debt servicing remains Pakistan’s single largest budgetary expense. For the 2025-26 fiscal year, debt repayments—both domestic and external—consume Rs 8.2 trillion, which is a striking 46.7% of the total federal budget of Rs 17.573 trillion.

This structural imbalance underlines the extreme pressure on fiscal resources and underscores the country’s vulnerability to shifts in creditor sentiment and rollover risks.

Compounding this crisis are Pakistan’s limited foreign exchange reserves, subdued export earnings, and dependency on rollovers and new borrowing for survival. Any reluctance from friendly countries to renew deposits, or unfavourable terms from multilateral agencies, could drastically worsen Pakistan’s economic stability and heighten the risk of a sovereign default.

Based On A PTI Report