ISLAMABAD: The International Monetary Fund (IMF) has projected increase in Pakistan’s external debt to reach $126.731 billion in 2025-26 up from $123.338 billion in 2024-25.

The Fund in its report on Pakistan stated that the country’s external debt is projected to further increase to $131.688 billion in 2026-27. External debt is projected to decrease to 30.3 percent of GDP for 2024-25 compared to 32.2 percent of GDP in 2023-24, but projected to further increase to 30.8 percent of GDP in 2025-26.

Pakistan’s domestic debt has been projected at Rs60.861 trillion for 2025-26 and Rs65.629 trillion for 2026-27 against the projectedRs54.567160 trillion in 2024-25.

Notwithstanding the continuation of fiscal consolidation and progress with lengthening maturities of domestic debt, near-term risks of sovereign stress remain high, reflecting Pakistan’s very large gross financing needs and past challenges in obtaining external financing.

While somewhat lower than at the time of the EFF request, elevated gross financing needs continue to pose high risks to debt sustainability, particularly as fiscal and reserve buffers are very low. In this regard, timely disbursements of committed bilateral and multilateral support are critical in the period ahead. Higher-for-longer interest rates, a prolonged stagnation due to tight macro policies, renewed pressures on the exchange rate, possibly policy reversals, and contingent liabilities related to SOEs pose significant risks to debt sustainability, the Fund added.—TAHIR AMIN