The Pakistan economy is projected to expand by 2.7% in the fiscal year ending June 2025 — with officials hailing the ‘gradual recovery’ of the country on Monday. The data was outlined in a government economic survey a day before the country unveils its federal budget. The optimistic numbers, however, belie several concerning developments in cash-strapped Pakistan, including record-high public debt.

“This year, we announced a 2.7% growth for 2025. This is a gradual recovery and the right way to go about it is to focus on sustainable growth. The next fiscal year will be a turnaround story,” Finance Minister Muhammad Aurangzeb exulted after releasing the key pre-budget document.

Islamabad had lowered the target to 2.7% last month after an initial goal of 3.6% GDP growth. Meanwhile the International Monetary Fund expects real GDP to grow by 2.6% in FY25 while the economy grows 3.6% in FY26.

Public debt reaches all-time high

“Total public debt stood at Rs 76,007 billion by end-March 2025, with domestic debt at Rs 51,518 billion and external debt at Rs 24,489 billion ($87 billion). During July–March FY2025, interest expense on public debt totaled Rs 6,439 billion, comprising Rs 5,783 billion on domestic debt and Rs 656 billion on external debt,” read an excerpt from the document highlights.

The number is a significant jump from the Rs 67,525 billion public debt recorded at the end of March 2024. The country has seen its public debt nearly double over the past four years — from Rs 39,860 billion in 2020-21. The country had significantly lower debt of Rs 17,380 billion ten years ago.

Finance Minister Aurangzeb noted during a presser on Monday that the “public debt and debt-to-GDP ratio was 68%, which is now 65%”. He also highlighted macroeconomic indicators — noting that the current account recorded a surplus of $1.9 billion during July–April FY25 amidst strong IT exports. Remittances were projected to reach $37–38 billion by year-end, up from $27 billion two years ago.

He stated that as of June 30, 2024, Pakistan’s forex reserves were $9.4 billion, representing a remarkable recovery from 2023, when the country had only two weeks of import cover. He said foreign exchange reserves rose to $16.64 billion in 2025, boosted by improved economic indicators and renewed investor confidence. Of the total reserves, the State Bank of Pakistan held $11.5 billion, while commercial banks retained $5.14 billion.
He said that the increase follows improved credit ratings, with Fitch upgrading Pakistan’s sovereign rating from CCC+ to B- with a stable outlook. The minister also announced plans to privatise 24 state-owned enterprises in the coming year, after curbing annual losses of Rs 800 billion. The minister said agriculture grew 2.6% while construction posted a 6.6% growth rate, while services expanded by 2.9%.

(With inputs from agencies)