Pakistan Spends Rs490bn on Debt Interest in Nine Months
During the first nine months of the last fiscal year, Pakistan discharged Rs490 billion in interest payments on both domestic and foreign debt. This substantial outflow underscores the escalating financial burden of debt servicing that continues to weigh heavily on the country’s budget, as revealed in documents submitted to the National Assembly by the Ministry of Finance.
Use of Foreign Loans in Key Projects
The disclosed records highlight how foreign loans have been allocated across various sectors. A substantial portion of these inflows—amounting to $11.42 billion—was earmarked for balancing payments and providing critical cash support to stabilize the economy. Additionally, $3.09 billion was directed towards energy-related initiatives, and $1.69 billion was spent on flood rehabilitation efforts.
The government is currently financing 14 major national projects through external borrowing, with seven energy projects actively progressing under the Ministry of Energy’s guidance. Significant foreign-funded energy projects include the Jamshoro power plant receiving $247.6 million, the Tarbela extension project financed with $475 million, the Dasu hydropower initiative backed by $225 million, and $93.22 million allocated to the Mohmand Dam project. Moreover, the Transmission Modernisation Project secured external financing worth $192.87 million.
Infrastructure and Development Programs Supported by External Aid
Beyond energy, infrastructure projects like the Sukkur-Multan Motorway and Karachi Mobility Project are benefiting from foreign loans. Pakistan is also implementing a $1.5 billion Building Resilience programme aimed at strengthening institutional capacity for responding to climate change and natural disasters. Loans have further been utilized to bolster higher education and environmental management sectors.
Of particular note, the $3.38 billion Saudi Oil Facility and the $2 billion financing programme from the International Islamic Trade Finance Corporation (ITFC) for oil and LNG imports are also underwritten through external borrowing, helping to ensure energy security.
Implications for Pakistan
The rising interest payments reflect ongoing fiscal challenges amid Pakistan’s heavy reliance on borrowing to fund development and stabilization efforts. As debt servicing consumes a significant share of government resources, there is increased pressure on policymakers to enhance revenue collection and manage expenditures carefully. This situation remains critical for Pakistan’s economic stability and growth prospects, affecting public spending on social and infrastructural programs crucial for citizens.
Highlighting the issue, a Ministry of Finance official commented, “The growing debt service burden demands prudent fiscal management and strategic investment choices to ensure sustainable development.” With foreign loans central to sustaining key projects, balancing debt servicing costs with development needs will be vital moving forward.
