Mounting debt requires bold steps

Pakistan's mounting debt has once again set off alarm bells, with business leaders and industry representatives urging the government to take urgent measures before the burden becomes unmanageable.

According to Lahore Chamber of Commerce and Industry's senior executive committee member Ali Imran Asif, the country's overall debt has surged to 83.6% of gross domestic product (GDP), putting a serious strain on the national economy. He described the situation as deeply worrying, revealing that Pakistan's per capita public debt has now reached Rs318,252, compared to Rs90,047 per person a decade ago.

"This means that every Pakistani today carries more than three times the debt they did 10 years ago. At the current growth rate of around 13% annually, this burden is doubling every six years. We are heading towards a point where future generations will inherit a mountain of debt unless bold corrective measures are taken," he said.

Asif explained that Pakistan's debt-to-GDP ratio has climbed steadily over the years. In 2009-10, the public debt was 54.6% of GDP. By 2014-15, it had increased to 57.1%, and in 2019-20, it hit a record 76.6%. Although the figure dropped to 67.8% in 2023-24, the ratio has once again risen above 70% in 2024-25, triggering renewed concern among economists and industry experts.

Regional comparisons make Pakistan's position even more striking. The debt-to-GDP ratio in Pakistan currently stands at 70.2%, while Bangladesh has managed to keep it as low as 36.4%. India's ratio stands at 57.1%, Indonesia's at 40.2% and Thailand's at 61.1%. The only country worse off is Sri Lanka, where debt has ballooned to 96.8% of GDP, contributing to its severe financial collapse.

Industry insiders say the root cause lies in Pakistan's budget deficits. "The higher the deficit, the greater the reliance on borrowing. This cycle has created a dangerous dependency on loans just to keep the economy afloat," Asif added.

He stressed the need for a structured repayment and management plan to steer Pakistan away from what he termed "a looming debt trap."

Economic experts also show their concern. Shahid Mehmood, an independent financial analyst, warned that rising debt levels are eating into the country's fiscal space.

"When nearly half of your budget goes into servicing loans, there is very little left for development, education, health care and infrastructure. This imbalance is choking economic growth. The government must prioritise reforms in revenue collection and cut down on unproductive spending," he said.

Business leaders echoed similar sentiments, pointing out that the burden of debt is ultimately borne by the private sector and ordinary citizens. Jamshed Khan, an entrepreneur, said the rising debt not only undermines investor confidence but also fuels inflationary pressures.

"When the government borrows excessively, it pushes inflation higher, squeezes household incomes and reduces purchasing power. This affects small businesses directly, as consumer demand weakens and costs rise," he said.

Khan argues that Pakistan needs a two-pronged approach, ie, fiscal discipline on the one hand, and growth-oriented policies on the other. The call is for the government to expand its tax base, encourage exports and attract foreign investment, while ensuring that loans are used for development rather than recurring expenses.

"Pakistan must act decisively to restructure its finances and reduce its reliance on borrowing. Without such reforms, the country risks sliding into a cycle where servicing debt overshadows all other national priorities," Khan added.