Pakistan’s debt as of person rose at a double-digit pace to nearly Rs 302,000 by the end of the last financial year, and the government also failed to contain the budget deficit to the prudent limit prescribed in an Act of Parliament, according to the new Fiscal Policy Statement on Tuesday.

The budget deficit in the last financial year exceeded the legal limit by more than double or Rs.4 trillion, Fiscal Policy Statement-2025 showed. Contrary to the legal requirement to limit the federal budget deficit to 3.5% of gross domestic product (GDP), the deficit shot to 7.3% of GDP or Rs 7.7 trillion. However, it was slightly higher than the budget target.

According to the Ministry of Finance’s fiscal report for the National Assembly, the debt burden increased per per capita from Rs.271,264. in the financial year 2023 to Rs.301,954. in FY 2024, showing an increase of Rs.30,690. or 11.3%.

The law requires the federal government to submit the policy statement to the National Assembly by the end of January with the reasons for any breach of the Fiscal Responsibility and Debt Limitation Act of 2005. Both the Minister of Finance and the Treasury Secretary have certified the authenticity of the analysis and the figures reported in the statement based on the information available until January 7.

This statement is presented to the National Assembly to fulfill the requirement in section 6 of the Fiscal Responsibility and Debt Limitation Act. The law requires the federal government to cause a fiscal policy statement to be submitted to the National Assembly by the end of January each year.

The federal government violated the core principle of sound fiscal management by limiting the federal budget deficit to the legal limit. Ironically, when the Chancellor of the Exchequer presented the Budget in June 2023, it was against the law as the federal deficit target was set at 7.1% of GDP.

The government admitted to the National Assembly that it violated the Fiscal Responsibility and Debt Limitation Act by failing to comply with the legal requirement to limit the budget deficit to 3.5% of GDP in the 2024 fiscal year.

“Limiting the federal fiscal deficit excluding foreign grants to 4% of GDP over the three years starting from the fiscal year 2017-18 and maintaining it at a maximum of 3.5% of GDP thereafter,” reads Section 3 (a ) in FRDL Handling.

The overall federal budget deficit remained at Rs7.7 trillion or 7.3% of GDP -Rs4 trillion or 3.8% of GDP higher than the legal limit, the report showed.

Total public debt also increased by almost 15% in the last financial year. It jumped from Rs62.9 trillion to Rs72.3 trillion due to higher interest payments on debt and exchange rate depreciation effect. But relative to the size of the economy, total public debt fell from 74.8% in June 2023 to 67.2% in June 2024.

The report stated that government spending also exceeded budget estimates due to an increase in supplementary payments, which remained 11.7% higher than the budget estimate. But the expenses outside the mark-up remained within the budget framework.

In the last financial year, it appears from the report, that inflation slowed and there was a surplus on the primary financial balance, an insignificant deficit on the current items and a stable exchange rate. The optimal policy mix, especially fiscal consolidation and targeted subsidies, played a crucial role in reviving the economy, it added.

But current spending reached 105.5% of budget estimates, primarily driven by increased top-up payments due to high interest, according to the report.

The budget for fiscal year 2024 estimated development spending at Rs1.14 trillion, but actual spending fell to Rs1.03 trillion due to Rs218 billion cuts to the PSDP.

The Finance Ministry’s report stated that total revenues observed a slight deficit, which contributed to the actual federal fiscal deficit of 7.3% of GDP against the budget target of 7.1% of GDP.