Victoria’s government debt has blown out by another $11.7 billion to more than $126 billion and global ratings agency S&P warns the state is on track to almost double that number by 2027.

The figures in the mid-year financial report released on Friday set the scene for a hard-cutting budget in May by Labor Treasurer Tim Pallas, who has faced criticism for shirking tough fiscal decisions in the past and is rumoured to be considering retirement soon afterwards.