Pakistan continues to exceed its legal debt limit, with the International Monetary Fund (IMF) warning that repayment risks could rise further amid high financing needs and structural economic challenges.
The country’s debt levels are projected to remain above mandated thresholds in the coming fiscal years.
According to official documents, Pakistan’s current debt stands at 72.8% of GDP, significantly higher than the legal limit of 60% of GDP.
The IMF projects that debt levels may remain above 67% in the next fiscal year, keeping the country outside the statutory benchmark.
IMF flags rising financial risks
The IMF has cautioned that Pakistan’s ability to repay its debt could face increasing pressure in the future due to high external financing needs.
While debt is described as “manageable in the medium term,” the Fund noted that overall risks remain elevated.
The IMF identified several economic vulnerabilities, including:
- Heavy reliance on government borrowing within the banking system
- Weak performance in smaller financial institutions
- High external financing requirements
- Pressures from global economic conditions and regional instability
It also warned that Pakistan’s repayment capacity depends heavily on continued external support and sustained reforms.
Energy and tax sector reforms urged
The Fund stressed the need for reforms in key sectors, particularly:
- Tax system improvements to strengthen revenue collection
- Reduction in government expenditures and financial losses
- Energy sector reforms to address circular debt issues
- Institutional restructuring to improve efficiency
The IMF also emphasized stabilizing external financing through energy sector reforms.
External pressures and economic risks
The report noted that inflation, exports, and foreign exchange reserves remain vulnerable to global developments, including geopolitical tensions.
It also warned that remittances could face risks depending on instability in the Middle East.
Despite current challenges, projections suggest a gradual decline in debt levels over the long term:
- 64.7% by 2028
- 61.6% by 2029
- 56.8% by 2033
- 55.7% by 2034 (government target aligned with IMF projections)
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