Pakistan’s interest payments on domestic and external debt are projected to exceed Rs10 trillion by fiscal year 2030-31, placing continued pressure on government finances and limiting the resources available for development and other public spending, according to projections attributed to the International Monetary Fund (IMF).
The interest bill is estimated at Rs8.054 trillion for the current fiscal year, FY2026-27, according to a report published by The News International on October 29, citing government officials.
The amount could increase further following a reported 50-basis-point rise in the State Bank of Pakistan’s policy rate from 11.5% to 12%.
The projections highlight the challenge of managing Pakistan’s public debt while maintaining fiscal discipline. Although the government has argued that the country’s debt-to-GDP ratio is declining, the cost of servicing existing borrowing continues to absorb a substantial share of available revenue.
The Ministry of Finance’s official FY2026-27 budget documents also identify debt servicing as a significant fiscal risk, particularly because of changes in interest rates, exchange rates and refinancing requirements.
IMF Projects Pakistan’s Interest Bill to Cross Rs10 Trillion
The IMF’s medium-term projections indicate that Pakistan’s interest payments will remain elevated through the end of the decade.
According to figures reported from the IMF’s fiscal projections, the interest bill is expected to follow this trajectory.
| Fiscal year | Projected interest payments |
|---|---|
| FY2026-27 | Rs7.284 trillion |
| FY2027-28 | Rs8.273 trillion |
| FY2028-29 | Rs8.681 trillion |
| FY2029-30 | Rs9.365 trillion |
| FY2030-31 | Rs10.322 trillion |
The figures show a projected increase of more than Rs3 trillion between FY2026-27 and FY2030-31. These are estimates, not confirmed future expenditures, and actual payments will depend on borrowing requirements, interest rates, debt management decisions and economic conditions.
The Ministry of Finance’s separate projections put interest payments at Rs8.68 trillion by FY2028-29, broadly consistent with the IMF figure cited for that year.
Debt Servicing Leaves Federal Government With Limited Revenue
Pakistan’s debt servicing obligations have significantly reduced the federal government’s fiscal space.
According to officials cited in the report, the federal government was left with net revenue receipts of around Rs3 trillion after interest payments and the transfer of provincial shares under the National Finance Commission (NFC) Award.
This leaves the Centre with limited resources to finance other responsibilities, including public services, infrastructure and development programmes.
The reported federal fiscal deficit stands at around Rs7 trillion in the current fiscal year. The consolidated deficit could be reduced to slightly above Rs5 trillion if provincial governments generate combined annual revenue surpluses of Rs1.5 trillion to Rs2 trillion, according to the same report.
Such reliance on provincial surpluses highlights the importance of coordination between federal and provincial governments in managing public finances.
The report also states that the federal government has borrowed more than Rs1.035 trillion under Article 164 of the Constitution. The precise purpose and accounting treatment of this borrowing should be assessed against the relevant official fiscal documents.
Higher Interest Rates Could Add to Borrowing Costs
Interest rates are an important factor in Pakistan’s debt-servicing outlook, particularly for government borrowing that must be refinanced or carries rates linked to prevailing market conditions.
A higher policy rate can increase the cost of new borrowing and refinancing, although the effect on total interest payments depends on the composition and maturity of the existing debt portfolio.
The Finance Ministry’s FY2026-27 Annual Budget Statement identifies changes in domestic and external interest rates as risks to the federal fiscal outlook. It also highlights the potential effects of currency depreciation on the rupee cost of servicing external debt.
These risks matter because a larger interest bill can widen the fiscal deficit if revenues fall short of expectations or borrowing costs exceed budget assumptions.
However, the effect of any policy-rate change should not be interpreted as an automatic, immediate increase in the cost of all government debt. The timing and scale of the impact depend on when debt is repriced, refinanced or newly issued.
Federal Fiscal Deficit Expected to Remain High
The federal fiscal deficit is projected at Rs7 trillion, equivalent to 4.9% of gross domestic product (GDP), in the current fiscal year.
The reported projections put the deficit at Rs7.1 trillion, or 4.5% of GDP, in FY2027-28 and Rs7.5 trillion, or 4.2% of GDP, in FY2028-29.
Although the projected deficit declines as a share of GDP, its nominal value is expected to increase over the period. This distinction matters because a lower deficit-to-GDP ratio does not necessarily mean that the government will spend fewer rupees than before.
The IMF’s Pakistan country page provides access to the institution’s official assessments and programme documents. Its fiscal projections should be read alongside Pakistan’s budget statements and debt statistics to understand how borrowing, revenue collection and interest costs interact.
Pakistan’s medium-term fiscal outlook will depend on the government’s ability to manage borrowing costs, strengthen revenue collection and control the growth of debt. The projected increase in interest payments underscores the continuing importance of debt management as policymakers balance fiscal targets with the need to fund public services and economic development.
