According to the report, Pakistan’s debt servicing costs have surged by over 64 percent this year, outstripping the meager revenue growth of 30 percent. The Ministry of Finance highlights that the interest expense has skyrocketed to around Rs4.2 trillion in the initial six months of the fiscal year, compared to Rs2.573 trillion for the same period in the previous year, marking a substantial increase of 65 percent.

 

This sharp spike in interest payments has left the country grappling with a dire situation where a significant portion of borrowed funds is being channeled towards debt servicing rather than productive sectors that could positively impact the lives of the public. As a result, a staggering 80 percent of both local and international borrowing has been devoured by interest payments, leaving minimal resources available for crucial development projects.

 

The utilization of development funds is suffering gravely, with only Rs158 billion, a mere 16.6 percent, being spent out of the allocated budget of Rs950 billion in the first half of the fiscal year. This calls into question the government’s commitment to fostering growth and prosperity through investments in infrastructure, education, healthcare, and other sectors vital for the nation’s progress.

 

The Ministry of Finance underscores that the high interest rate environment has been a primary driver of the surging debt servicing costs, leading to a substantial portion of current expenditure being earmarked for interest payments. This has severely impeded the government’s ability to allocate funds towards development programs and initiatives, stalling progress and hindering economic growth.

 

Report reveals that the federal fiscal deficit has widened to Rs2.697 trillion, equivalent to 2.5 percent of the GDP, in the first half of the fiscal year, reflecting a worrying trend of escalating financial imbalances. The increasing burden of interest payments on both domestic and external debts has further exacerbated the fiscal challenges faced by the government, necessitating urgent and strategic interventions to address the mounting debt crisis. While the provinces have shown a commendable increase in cash surplus contributions this year, the overall deficit at the national level remains stubbornly high at 2.3 percent of GDP. Efforts to enhance revenue collection through the Federal Board of Revenue (FBR) have yielded positive results, with a 30.3 percent increase in collections compared to the previous year.

Revenue growth has been overshadowed by the ballooning debt servicing costs, raising concerns about the sustainability of the current economic trajectory. In light of these dire circumstances, it is imperative for the government to reassess its fiscal priorities and implement prudent economic policies aimed at curbing the rising debt servicing costs while promoting sustainable growth and development. Measures such as reducing reliance on external borrowing, enhancing revenue mobilization, improving expenditure management, and fostering a conducive environment for private sector investment can help alleviate the burden of debt and pave the way for a more prosperous future.

 

The government must prioritize long-term economic stability over short-term fixes and demonstrate a steadfast commitment to addressing the root causes of the debt crisis. By fostering a conducive economic environment that encourages investment, innovation, and inclusive growth, Pakistan can overcome its current challenges and chart a path towards sustained prosperity for its citizens.