Pakistan’s interest payments on domestic and external debt are projected to reach Rs8.054 trillion in the current fiscal year, continuing to absorb a large share of public resources and leave the federal budget under strain.
The bill could edge higher after the State Bank of Pakistan’s Monetary Policy Committee raised the policy rate by 50 basis points to 12% from 11.5%. Official sources said debt-servicing pressure will remain elevated over the medium term.
Debt costs already crowd out other spending
Interest payments have already outpaced defence and development expenditure at the same time, adding to the government’s financial pressure as the overall debt stock grows.
The government has often presented new borrowing, including from foreign lenders, as a success. Officials still argue that the debt-to-GDP ratio is falling, but the rising cost of servicing that debt is creating serious risks for the fiscal framework.
Debt servicing has taken a substantial share of tax and non-tax revenues. After provinces receive their share under the National Finance Commission (NFC) Award — the formula that divides federal resources among the federation and the provinces — the Centre is left with limited funds for its own obligations.
Limited federal space after debt service
In earlier years the federal government would fall into deficit after meeting interest payments. Since the last fiscal year, however, it has been left with net revenue receipts of around Rs3 trillion once debt service is paid.
The federal fiscal deficit has consequently stayed around Rs7 trillion. The consolidated deficit could fall to just over Rs5 trillion only if the provinces generate annual revenue surpluses of Rs1.5 trillion to Rs2 trillion — an arrangement officials described as ad hoc and not a lasting fix.
The federal government has also borrowed more than Rs1.035 trillion by invoking Article 164 of the 1973 Constitution, which allows additional borrowing in certain circumstances.
What the Finance Ministry and IMF project
According to Ministry of Finance projections, interest payments could reach Rs8.68 trillion by FY2029.
The International Monetary Fund (IMF) — the global lender working with Pakistan under its programme — expects the interest bill to keep rising and to exceed Rs10 trillion by FY2031. Its path runs through Rs7.284 trillion in FY2026-27, Rs8.273 trillion in FY2027-28, Rs8.681 trillion in FY2028-29, Rs9.365 trillion in FY2029-30, and Rs10.322 trillion in FY2030-31.
The federal fiscal deficit is projected at Rs7 trillion, or 4.9% of GDP, this year. It is expected at Rs7.1 trillion (4.5% of GDP) in FY2027-28 and Rs7.5 trillion (4.2% of GDP) in FY2028-29 — smaller as a share of the economy, but still large in rupee terms as interest costs stay high.
Timeline: what has happened so far
- Current fiscal year: Interest payments projected at Rs8.054 trillion; federal deficit about Rs7 trillion (4.9% of GDP).
- After latest SBP decision: Policy rate raised 50 basis points to 12%, which may nudge interest costs slightly higher.
- Since last fiscal year: Centre left with roughly Rs3 trillion in net revenue receipts after debt service; Article 164 borrowing above Rs1.035 trillion.
- FY2026-27 to FY2028-29 (IMF): Interest bill seen at Rs7.284tr, then Rs8.273tr, then Rs8.681tr.
- By FY2029 (Finance Ministry): Interest payments could reach Rs8.68 trillion.
- By FY2030-31 (IMF): Interest payments projected at Rs10.322 trillion.
Aasan alfaaz mein
Pakistan ko is saal qarz ke sud par lagbhag 8 trillion rupay denay pad sakte hain. Yeh kharcha defence aur taraqqi ke budget se bhi zyada ho chuka hai. Markaz ke paas NFC aur sud ada karne ke baad kam paisa bachta hai. Aam shehri ke liye is ka matlab yeh hai ke hukumat ke paas schools, hospitals aur tarakee ke liye kam gunjaish reh sakti hai.
