Pakistan’s interest payments are expected to reach Rs8.054 trillion in the current fiscal year, putting further pressure on the country’s finances. The rising cost of servicing public debt continues to consume a significant share of government resources.
The burden could increase further after the State Bank of Pakistan raised its policy rate by 50 basis points to 12 per cent from 11.5 per cent.
Debt Servicing Leaves Government With Limited Funds
Interest payments have exceeded both defence and development spending, highlighting the scale of Pakistan’s debt burden.
After transferring provincial shares under the National Finance Commission (NFC) Award, the federal government has limited revenue available for other expenses.
The government has relied heavily on borrowing to meet its financial obligations. Consequently, debt servicing continues to restrict the funds available for public services and development projects.
The federal fiscal deficit is projected at around Rs7 trillion in the current fiscal year, equivalent to 4.9 per cent of gross domestic product (GDP).
IMF Projects Interest Bill to Exceed Rs10 Trillion
The Ministry of Finance expects annual interest payments to reach Rs8.681 trillion by fiscal year 2028-29.
Meanwhile, International Monetary Fund (IMF) projections indicate that the bill could exceed Rs10 trillion by fiscal year 2030-31.
According to the projections, interest payments could reach Rs7.284 trillion in FY2026-27 and Rs8.273 trillion in FY2027-28. The amount may then rise to Rs9.365 trillion in FY2029-30 before reaching Rs10.322 trillion the following year.
These figures highlight the long-term pressure that debt servicing could place on the federal budget.
Fiscal Deficit Remains a Major Challenge
Pakistan’s fiscal position remains under pressure as debt costs absorb resources that could otherwise support public investment.
The government has also relied on provincial budget surpluses to help contain the consolidated deficit. However, officials have described this arrangement as an unsustainable, temporary measure.
The rising interest bill leaves policymakers with difficult choices over spending, borrowing and revenue collection. Without lasting improvements in public finances, debt servicing could continue to limit development spending and essential services.
Pakistan’s ability to manage borrowing costs and strengthen its fiscal position will remain crucial to reducing pressure on future budgets.
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