PAKISTAN`S public debt has surged by 76pc to Rs86.7tr in four years, according to a new government report. Though the debt-to-GDP ratio fell to 68.3pc in FY26 from 70.6pc a year earlier, the improvement offers little comfort. Headline debt is still rising while weak growth limits the revenues and exports needed to service it. Furthermore, over the past decade, an average of 81pc of the fiscal deficit was financed domestically. Reliance on local banks has effectively turned government securities into a most attractive asset for lenders, leaving less room for private sector credit and investment. Now the government plans to shift borrowing towards longer-term bonds and wider market participation. This is a sensible step, but the fiscal deficit is the real problem. The government expects a federal deficit of Rs7tr in FY27. That means a large part of the new borrowing will simply refinance old obligations rather than fund productive public investment.

The debate over debt must move beyond the debt stock itself.

Borrowing for infrastructure, human capital or projects that raise productivity can create the capacity to service debt. Borrowing year after year to finance recurrent expenditure merely transfers today`s fiscal weakness to tomorrow. Lower interest costs last year are encouraging, but they should not obscure the scale of the burden. Interest expenditure was still Rs6.95tr in FY26, even after falling 22pc. That is money that cannot be spent on schools, health, infrastructure or development. The government`s borrowing strategy can improve the structure of debt. It cannot, by itself, make debt sustainable. That requires a durable primary surplus, broader and more reliable taxation, restraint in recurrent spending, and faster economic growth based on investment and exports rather than consumption and borrowing.

Pakistan has ignored fiscal weakness. Better bonds and longer maturities can ease refinancing, but without spending discipline and faster growth, they only make debt easier to roll over.