Karachi, February 10, 2025 – In a stark reflection of the growing financial burden on Pakistan, the government has paid a massive Rs 5.14 trillion as mark-up on loans from both local and international financial institutions during the first half (July-December) of the fiscal year 2024-25. This payment highlights the ongoing fiscal challenges the government faces, as debt servicing costs continue to escalate, weighing heavily on the nation’s finances.
The figure represents a substantial increase in the government’s financial obligations, marking a 22% rise from Rs 4.22 trillion in the same period of the previous fiscal year. The escalating debt servicing costs have been a key point of concern for the government, as it grapples with managing a growing debt load amid a challenging economic environment.
A report issued by the Ministry of Finance outlines the breakdown of the mark-up payments, revealing that the government’s mark-up payments on domestic loans saw a significant surge. These payments rose by 26% to reach Rs 4.675 trillion in the first half of FY25, up from Rs 3.718 trillion during the same period last year. The increase in domestic debt payments comes as the government continues to rely on local financial institutions to meet its fiscal needs.
On the other hand, the government experienced a slight decline in its mark-up payments on foreign loans. These payments dropped by 7%, falling to Rs 467 billion from Rs 502 billion during the same period in the previous fiscal year. Despite the decrease in foreign debt servicing costs, the overall mark-up payments continue to contribute significantly to the government’s rising fiscal obligations.
Debt servicing remains the largest component of Pakistan’s current expenditures. Total current expenditures surged by 18% to Rs 10.12 trillion in the first half of FY25, compared to Rs 8.56 trillion in the same period last year. The growth in expenditures highlights the government’s struggle to balance fiscal discipline while simultaneously addressing the mounting needs of the economy. Managing debt and allocating resources to critical sectors has become increasingly challenging as the country faces ongoing economic pressures.
In contrast to the rising debt servicing costs, government spending on subsidies saw a notable decline. The subsidies paid out by the government fell by 37%, dropping to Rs 237 billion in the first half of FY25 from Rs 375 billion in the same period of the previous year. This reduction is part of the government’s broader strategy to optimize fiscal resources while still attempting to provide some relief to the public amidst the ongoing inflationary pressures.
Meanwhile, the government has increased its funding for defense services. Expenditures in this sector rose by 17.57%, reaching Rs 890 billion during the first half of FY25, up from Rs 757 billion during the same period last year. Similarly, pension payments also saw an increase, rising by 11.38% to Rs 450 billion compared to Rs 404 billion in the corresponding period of FY24.
Administrative expenses have similarly grown, with the government allocating Rs 339 billion for administrative costs, marking a 12.25% increase over the previous fiscal year’s Rs 302 billion. These rising administrative costs further contribute to the financial pressures facing the government, as it seeks to balance fiscal constraints with the delivery of essential services.
As Pakistan’s debt servicing and fiscal pressures continue to mount, the government is working to maintain essential services and obligations while striving to address the broader economic challenges facing the nation. The balancing act between debt management, economic growth, and public welfare remains one of the key issues on the government’s agenda as it navigates the complexities of the current fiscal year.