PAKISTAN’S external debt has nearly doubled in a decade — from $68.7bn in 2015 to $135.1bn in 2025 — according to a new World Bank report. Public and publicly guaranteed debt accounts for $107.1bn of the total, private debt for $17.6bn, and short-term borrowing for $10.45bn. China is the largest single creditor with $22.4bn outstanding, followed by the World Bank and Asian Development Bank. The rise itself is not surprising but the pace is striking. Much of this borrowing went towards plugging external financing gaps, propping up reserves, and repaying older loans to keep the economy running. The debt spike describes an economy that invests, produces and earns too little to service what it owes. Debt has become the main constraint on our fiscal and economic prospects. Servicing debt eats up meagre financial resources, which should be expanding productive capacity for exports, and makes faster growth harder to reach. That leads to more borrowing. The government borrows to cover consumption, budget deficits, and external payments — not to build anything that pays for itself. Development spending is usually the first thing to be cut, and growth has crawled along at 2.7pc in recent years.

There is nothing wrong with borrowing. Developing economies need foreign capital for infrastructure, energy, technology, and industry. The trouble starts when loans do not raise domestic productivity or lift exports. Successive governments have failed to tell apart borrowing that builds capacity from borrowing that only buys time. Pakistan’s recurring balance-of-payments crisis underscores this fact. The country’s exports are weak, the production base is narrow, investment is low, and fiscal deficits refuse to go away. So, the economy keeps relying on foreign and domestic loans. Remittances, rollovers by friendly countries, and one IMF programme after another may have staved off immediate default, but none of them has addressed the underlying problem. It does not matter much if the country can raise another loan or defer another repayment. What matters is whether the country can generate enough growth, tax revenue, and foreign exchange to meet its obligations without sacrificing its development.

The situation calls for a credible, short- to long-term strategy to invest in projects that raise productivity, exports, and foreign exchange earnings. The strategy must be accompanied by wider reforms aimed at expansion of the tax base, more productive public spending, and lower costs of doing business. Exporters need energy that is reliable and competitively priced, policies they can predict, and access to modern technology. Without these, even fresh foreign investment and cheaper credit will yield little value, growth will remain anaemic, children stunted, and communities without basic services such as clean drinking water. And debt will continue to constrain the country’s economic sovereignty and prosperity.

Published in Dawn, November 7th, 2026