Introduction: The Wrong Question Keeps Getting Asked
For more than a decade, Pakistan’s economic debate has revolved around a single, misleading question: “If tax collection is rising, why is debt still exploding?”
The answer is uncomfortable, but not complicated.
Pakistan’s debt crisis is not a failure of taxation.
It is a failure of expenditure discipline, compounded by debt-servicing dynamics that now dominate the federal budget.
Markets understand this.
Politicians mostly don’t.
And the Pakistan Stock Exchange (PSX) has been quietly pricing this reality for years.
The Fiscal Paradox (FY15–FY25): Bigger Taxes, Bigger Debt
Let’s start with the numbers that matter.
Reconstructed Fiscal Snapshot (FY15 vs FY25)
| Metric | FY15 | FY25 | Change |
|---|---|---|---|
| Tax Revenue | PKR 2.91 trillion | PKR 11.7 trillion | +302% |
| Public Debt | PKR 17.3 trillion | PKR 80.5 trillion | +365% |
Key implication:
For every additional rupee collected in taxes, Pakistan added ≈ PKR 7.2 to its public debt.
This is not a revenue problem. It is a spending + financing structure problem.
Nominal vs Real Growth (Why the Illusion Persists)
Much of the “growth” in tax collection is nominal, not real.
A simple example from data points:
