Leading Issues in the Economy of Pakistan: Agenda for Reforms The consequence of the rising debt burden is that there has been exponential growth in the level of public debt servicing. It was 3.6 percent of the GDP in 2016-17 and has risen to 4.8 percent of the GDP in 2021-22. Almost 85 percent of the net federal tax revenues are being used to finance the costs of debt servicing rather than for the provision of basic services to the people. The objective of this article is to highlight the growth in the total debt of Pakistan and the changing composition of the debt in Section 12.1. This enables the determination of the causes of growth in debt in Section 12.2. Section 12.3 highlights the impact of the rising debt on different aspects of the economy. Section 12.4 then presents a medium-term budgetary framework to achieve progressive reduction in the government debt to GDP ratio which is at over 66 percent today down to 60 percent of the GDP. This is the ceiling imposed by the Fiscal Responsibility and Debt Limitation Act of 2005. 12.1 Growth in Debt The State Bank of Pakistan has identified three levels of debt. The narrowest coverage is of government debt, which consists of the outstanding stock of domestic and external borrowing by the Federal Government. The next level is public debt. This is government debt plus external liabilities of the SBP and debt with the IMF. The highest level of debt is the overall debt of Pakistan. This includes public debt plus the debt, both external and domestic, incurred by the public sector enterprises and the private sector, along with the debt arising out of commodity operations. The Fiscal Responsibility and Debt Limitation Act has adopted a different definition of government debt, as follows: Government Debt= Government Domestic Debt+ Government External Debt+ Debt with IMF – Government Deposits with the bank system of Pakistan The change in each type of debt’s composition is described in Chart 12.1 over the period, 2015-16 to 2021-22. 118