Pakistan is expected to spend an enormous amount of money on debt repayments over the next five years, highlighting the growing pressure of public debt on the country’s economy and government finances.
According to official documents, the government is projected to pay nearly Rs. 45 trillion in interest payments between fiscal year 2026-27 and fiscal year 2030-31. This amount represents only the interest on loans and does not include repayment of the original borrowed amount. The figures show how debt servicing has become one of the largest expenses in the federal budget.
The rising debt burden has become a major challenge for Pakistan as the government continues to rely on both domestic and foreign borrowing to finance budget deficits, development projects, and other expenditures. As debt levels increase, the amount required to pay interest on these loans also continues to grow.
Officials say debt servicing costs have now reached a level equal to roughly two and a half years of the federal government’s annual revenue collection. This means that if the government were to dedicate all of its yearly revenue solely to paying interest expenses, it would still need around two and a half years to cover the current debt servicing burden.
For the upcoming fiscal year 2026-27, Pakistan is expected to spend approximately Rs. 7.824 trillion on interest payments alone. This will make debt servicing one of the largest expenditure items in the federal budget.
The burden is expected to increase further in the following years.
According to government projections:
- Interest payments are expected to reach Rs. 8.273 trillion in FY2027-28.
- The amount is projected to rise to Rs. 8.681 trillion in FY2028-29.
- In FY2029-30, interest payments are expected to increase to Rs. 9.365 trillion.
- By FY2030-31, annual interest payments are forecast to exceed Rs. 10 trillion for the first time in Pakistan’s history, reaching a record Rs. 10.322 trillion.
These figures show a continuous upward trend in debt servicing costs, reflecting both the size of Pakistan’s debt and the higher interest rates attached to many loans.
Economic experts warn that rising debt payments can significantly reduce the government’s ability to spend on other important sectors such as education, healthcare, infrastructure, social welfare programs, and development projects.
When a large portion of government revenue is used to pay interest on loans, fewer resources remain available for public services and economic growth initiatives. This can slow down development and create additional fiscal challenges.
The government plans to finance these interest payments through a combination of tax and non-tax revenues.
Tax revenues include income tax, sales tax, customs duties, and other taxes collected by the Federal Board of Revenue (FBR). Non-tax revenues include profits from state-owned enterprises, petroleum levies, fees, dividends, and other government earnings.
However, economists point out that Pakistan’s revenue collection remains relatively low compared to the size of the economy. As a result, the government often needs to borrow more money to meet its financial obligations, creating a cycle where new borrowing is used to service existing debt.
The official documents also reveal that Pakistan’s total external debt and liabilities have crossed $104 billion. This includes loans taken from foreign governments, international financial institutions, commercial lenders, and other external sources.
Meanwhile, the federal government’s direct external debt has exceeded $82 billion. These loans are mainly owed to institutions such as the International Monetary Fund (IMF), World Bank, Asian Development Bank, friendly countries, and international investors.
External debt creates additional challenges because repayments must be made in foreign currencies, particularly US dollars. When the Pakistani rupee weakens against the dollar, the cost of repaying foreign loans increases significantly.
In recent years, Pakistan has faced repeated economic pressures due to high inflation, currency depreciation, rising import costs, and global economic uncertainty. These factors have increased the government’s borrowing needs while also making debt repayment more expensive.
Analysts believe that controlling debt servicing costs will require long-term economic reforms. These may include increasing tax collection, expanding exports, encouraging investment, reducing unnecessary government spending, and improving the performance of state-owned enterprises.
Many experts also stress the importance of maintaining sustainable borrowing levels. While borrowing can help finance development and economic growth, excessive dependence on loans can create long-term financial risks if debt continues to grow faster than government revenues.
The government’s upcoming budget is expected to place significant emphasis on managing debt obligations while balancing spending needs in key sectors. Policymakers face the difficult task of supporting economic growth, providing public services, and meeting debt repayment commitments at the same time.
The projected Rs. 45 trillion interest bill over the next five years highlights the scale of Pakistan’s debt challenge. As debt servicing consumes a growing share of national resources, improving fiscal management and strengthening economic growth will remain critical priorities for the country’s future financial stability.
With annual interest payments expected to cross the Rs. 10 trillion mark by FY2030-31, the coming years will be crucial in determining whether Pakistan can successfully reduce its debt burden and create a more sustainable economic path for future generations.
