Rs1.7tr paid in debt servicing

E-Paper | March 02, 2026

KARACHI: Pakistan paid Rs1.704 trillion to service its overall debt during the previous fiscal year, said a latest government report.

The report indicated that while interest payments on the debt increased substantially, the repayment of principal amount on external debt fell to Rs358bn from Rs608bn a year ago which helped reduce the overall debt and liabilities servicing by 4.9 per cent.

Interest payments on external debt, however, increased to Rs109.9bn from Rs91bn in the previous fiscal year.

But a sharp increase in domestic interest payments, which saw a year-on-year rise of Rs132bn to reach Rs1.175tr in FY15, seems to be the real problem for the government which, because of severe shortage of revenue, is compelled to borrow more from both external and domestic sources.

The external borrowing has helped the government build foreign exchange reserves to a record $18.5bn this year.

The interest payments on domestic debt are rising each year — the government has paid Rs3.123tr since 2013 — because of large accumulation of debts through Pakistan investment Bonds (PIBs) and treasury bills (T-bills).

Banks and the corporate sector jointly hold PIBs, T-bills and sukuk worth over Rs7tr which requires massive debt servicing, which is about 40pc of the government’s revenue collection.

Independent economists and analysts have criticised the government’s borrowing strategy which they say has failed to induce economic growth.

During the last two years, the government added Rs3.526tr to the domestic debt, which was Rs19.914tr at the end of FY15.

It was also observed that due to massive borrowing from banks, the government has deprived the private sector of borrowing from banks. On the other hand, banks also find it safe to earn easy profits by investing in risk-free government papers.

Despite the fact that liquidity is being generated through borrowing, the development funds have to see a cut each year which hampered the economic growth.

Analysts and economists have indicated that the debt and interest repayments would rise by next year when the country’s repayment to the IMF increases.

Published in Dawn, August 30th, 2015

On a mobile phone? Get the Dawn Mobile App: Apple Store | Google Play

Pakistan

Shahid Iqbal is a reporter for Dawn based in Karachi with 38 years of experience covering politics and economics. His career includes seven years with the Japanese newspaper Asahi Shimbun, as well as roles at United Press International (UPI) and AFP.

$60bn Indian plan for river storage raises alarm

Ruckus in Parliament as President Zardari addresses joint sitting

Multiple roads closed in Karachi’s West, South districts over prevailing security situation

Sal

Aug 30, 2015 12:04pm

Pakistan GDP is low and the debt is much larger. Pakistan will not develop and 8 years of democracy has slow down the country.

Recommend 0

washim

Aug 30, 2015 12:09pm

The external borrowing has helped the government build foreign exchange reserves to a record $18.5bn this year.Debt is $300 bn or has changed now.

Recommend 0

Hassan

Aug 30, 2015 01:37pm

"liquidity is generated through borrowing . . . " pretty much sums up the strategy of our finance ministry for running the country. It's like a bog, they more you move deeper you will sink.

Recommend 0

Vns

Aug 30, 2015 02:11pm

And Pakistan is spending $ 7 billions almost half of its reserves in Nuclear bombs..

Recommend 0

Khi92

Aug 30, 2015 03:13pm

Debt Servicing is Interest that Means 'Sood' and Pakistan gives arount $17b in Interest that means debt equals nearby $340b. And fool nation believes that we are prospering economically!

Recommend 0

nac Paris

Aug 30, 2015 03:40pm

who cares about poor when the government can afford bottled water or was it that they didn't realize that they could have minted billions by changing the pipelines installed by British.

Recommend 0

Qamar

Aug 30, 2015 04:01pm

Dar is sinking Pakistan deep into debt.

Recommend 0

Aug 30, 2015 04:04pm

Parliament is not performing and the Supreme court has not taken any action against the government which continues its borrowing spree to bury the nation under enormous debt. Does the constitution say anything when the future of the nation is being put at risk irresponsibly. The borrowing must stop and the government should be forced to reduce its expenses by at least 50% during the current fiscal period. The government can achieve the savings by shutting down unnecessary departments and significantly reducing its size. Reduction in the size of the government will save money and reduce corruption.

Recommend 0

Karachi Wally

Aug 30, 2015 05:59pm

Macro economy is not PML or PPP's forte or priority. It needs political will and corruption free regime . These people cannot do it PERIOD. Raheel Sharif has to take active part in revival of economy with help from experts!! I am happy nobody has blamed IK or dharnas for the mess!!

Recommend 0

Anil

Aug 30, 2015 08:13pm

That where my tax go. Not to economy development welfare infrastructure. The PML_N government is very good to balance the book easy way. So they can have comfortable life. Who will pay this huge debt? Mr Nawaz Sharif and Mr Dar wont be here for ever.

Recommend 0

UnshacklePakistan

Aug 30, 2015 08:21pm

Simply remove gov't subsidies, welfare and control. Let private owners make decisions. Just like cell phone companies and shoe companies and others the standards would rise, the debt would be removed due to selling assets and efficiency likely would return. USSR, N Korea, E Germany, Cuba, Argentina etc., all suffered due to gov't ownership of resources. Even India & China are becoming increasingly capitalists and getting stronger. Gov't control only serves those who are in charge.

Recommend 0

Nilesh

Aug 30, 2015 08:27pm

I expected a lot of comments on this article.... It matters and is of prime importance. The nation and intellects need to start giving back to society. Both India and Pakistan need to cut spend on nuclear bomb and start investing on energy .....

Recommend 0

javed

Aug 30, 2015 08:55pm

@Vns where did you get this figure of 7 $bl and nuclear bomb. That's nonsense. Corruption and government waste of not finishing the projects is Pakistan's biggest problem. Pakistan spend billions on projects every year that never get completed. Kala bagh dam billions spent several times on fake feasibility , machineries,housing, committees, surveys and they never had a intension to build. There, fore pls stop bashing defense of Pakistan.

Recommend 0

Pakistani

Aug 30, 2015 09:49pm

Modern economics! What a wonderful tool to make a fool out of anyone. They make it appear as if you are prospering but infact you are continuously sinking in a hole. The more you follow its theories, the quicker you sink. This whole idea of buying and building things by borrowing money is essentially insane - and would be easy to spot as such were it not so prevalent. The layman's term for this style of living is: living beyond one's means. Look what Greece is going through - and prior to that Argentina had to go through. All of them borrow money from foreign donors. Their banks allowed lavish projects to be undertaken - thinking this is 'prosperity'. Foreign donors were hoping taxes and tolls from such projects will earn them profit. It didn't. So they are now out to reclaim their investments. Nobody gives you loan unless they have a plan to make more out of it. Stop building and collecting 'things' from loan money. Prosperity can not be imported. It has to be built from within.

Recommend 0

Just Someone

Aug 31, 2015 01:44am

@AW : Or perhaps that citizens can start paying tax and the govt. will not need to borrow!

Recommend 0

AliG

Aug 31, 2015 02:16am

The commenters are forgetting the point that the Government is honouring their Debt payments not by printing more but through other means, what they might be. The wrong/easy approach would have been to print more notes and pay off the domestic debt. Last governments have always taken the printing approach to pay debts causing high inflation as a result. Look at inflation figures! Think critically before writing something on the Internet.

Recommend 0

Shawn

Aug 31, 2015 08:38am

@Karachi Wally how can a civil servant who only knows about defense can save the economy???? Even when Musharraf made gdp go high it wasn't true economical growth there was no investment in the country. Imagine if you were a doctor and I tell you to be an engineer as well at the same time. At this strategically PML is the only choice for the country. I am not a supporter or anything. we need civilian governments to gain experience and develope a system through out the country it may take years but it is needed.

Recommend 0

Aug 31, 2015 09:03am

In 2002 the USA under president G. Bush forgave Pakistan of $3bn debt and later I believe additional $ 1bn so that Pakistan Gen. Mushruf supports USA in supporting US-led coalition's war against terrorism during the war to remove the Taleban government from neighboring Afghanistan. If this loan interest is included then this interest number that is today would be more.

Recommend 0

Shahid

Aug 31, 2015 09:54am

The way current government is borrowing from Domestic banks, in few years time all the national budget will be directed towards debt servicing, way to go " Experienced Economic Team"

Recommend 0

Aug 31, 2015 10:19am

@javed Even the project completed, Tarbela Dam was over the budget.

Recommend 0