In 2024-25, the Government of Pakistan paid Rs. 8,887 billion in interest on loans, which is 9% more than the previous year. The federal government was paying interest at an average rate of Rs. 24 and Rs. 295 billion per day and per month, respectively.
During the April- June 2025 quarter the interest paid so far stood at Rs. 2.440 billion alone. Majority of the debts are created by domestic banks, and part of the debts come by foreign loans. The government has allocated an interest outflow of Rs. 8,207 billion in FY 2025-26 in terms of daily flows the outflow estimates are of about Rs. 22 billion/day.
According to the Federal Board of Revenue (FBR), Pakistan collected Rs. 11,744 billion in taxes last year. Over 80% of the collected taxes were used for debt servicing. In the 2025-26 budget, 46.7% of total expenditures are earmarked for interest payments.
The federal government’s interest payments exceed the individual budgets of all four provinces. Debt servicing in 2024-25 was more than three times higher than the defense budget of Rs. 2,194 billion and higher than the combined subsidies, grants (Rs. 2,931 billion), and development expenditures (Rs. 2,966 billion). Federal transfers to provinces stood at Rs. 6,854 billion, lower than the total interest payments.
Economist Dr. Shahid Hasan Siddiqui, in an interview with Hamariweb, stated that Pakistan’s tax-to-GDP ratio remains low, tax evasion is widespread, and the government collects far less than its estimated Rs. 25,000 billion potential. He highlighted low savings, declining investment, higher imports than exports, and lack of economic reforms as key contributors to the growing debt burden.
He even added that the pressure in the economy has enhanced because domestic and international elites have caused the failure of those institutions such as the State Bank of Pakistan, the FBR, and the SECP to make available the necessary reforms.
