Pakistan's short-term foreign debt climbs to whopping $30.6bn

Pakistan struggles with its financial woes as obligations on its debt cause fiscal pressures. As per credible reports, short-term debt has climbed to a staggering $30.6 billion in foreign repayments.

On the other hand, domestic debt has reached a colossal 51 trillion rupees, causing a significant strain on the cash-strapped country’s already strained foreign reserves.

Data from the State Bank of Pakistan (SBP) has revealed that Pakistan’s total debt continues its upward trend as both domestic and foreign debt show no signs of slowing down. As per reports, Pakistan is set to face repayment obligations which would result in a net outflow of $30.6 billion.

Concerningly, these obligations are not scheduled over a longer period and, instead, are to be met in the coming months. Given how the SBP holds a meagre $10.6 billion in official foreign reserves, many wonder how Pakistan will avert the looming repayment crisis.

Pakistan might have to restructure its debt holdings and request for rollovers and better repayment conditions. If lawmakers and authorities can successfully negotiate more favorable conditions, the economy might get some breathing room.

The federal government has recently been working with commercial banks to restructure its liabilities to tackle the growing circular debt issue. However, the existing debt may be too large to tackle with micro-level restructuring arrangements. 

According to reports, Islamabad’s domestic debt holdings have surged by a whopping 18.81 percent on a year-on-year (YoY) basis. This caused the government's debt stock to sit at an uneasy 51.28 trillion rupees by February 2025.

This marks a stark increase in debt from the same month last year, February 2024, as the government’s debt holdings stood at just 43.17 trillion rupees. This meteoric rise in debt is causing independent analysts to worry about the sustainability of Pakistan’s ever-rising credit demand. 

On a month-on-month basis, however, the domestic debt value posted a marginal growth rate of 1.49 percent. This indicates a slowdown in borrowing in the short run after the government accumulated a large debt stock over the months leading up to February 2025. 

While some consider the domestic debt growth to be concerning, the increase in permanent debt is arguably more alarming. Reports suggest that permanent debt has grown by a whopping 25.42 percent on a YoY basis to settle at 39.43 trillion rupees.

For reference, permanent debt includes prize and federal government bonds. Moreover, floating debt, mainly made up of treasury bills, has also increased to 8.23 trillion.