In the Mid-Year Budget Review Report for FY2023-24, Pakistan’s Ministry of Finance revealed a concerning trend: debt servicing costs have spiked by 64%, surpassing the 30% revenue growth and constraining development spending.
The surge is attributed to steep interest rates influenced by the IMF, resulting in record-high interest expenses of approximately Rs 4.2 trillion in the first six months, a 65% increase from last year.
This year’s interest payments are forecasted to reach Rs7.3 trillion, consuming nearly 58% of the budget estimates, diverting funds away from productive sectors.
Most of the borrowed funds were absorbed by interest payments, leaving only a small portion for development projects. Only Rs158 billion was spent in the first half, far below the target of 50% of the annual allocation.
The report also highlighted that 88% of the interest payments were for domestic debt. The federal fiscal deficit rose to Rs2.697 trillion, 2.5% of GDP, compared to Rs1.78 trillion, 2.1% of GDP, last year.
Despite improved provincial contributions, with a cash surplus of Rs289 billion, the overall deficit remained at 2.3% of GDP, slightly higher than the previous year.
