Reducing debt servicing by Rs1tr

Some believe that Pakistan’s real risks are on the external side, and the country should focus on raising money to refinance and service its external debts. However, given its low credit rating, it seems highly unlikely that Pakistan will be able to raise money from the international debt markets soon. Moody’s Investor Service noted in its report of Feb 27 that Pakistan’s “ca” fiscal rating reflects its large debt burden and weak debt affordability. Pakistan’s total public debt stood at Rs67.3 trillion ($239 billion) on Dec 31, 2023, and accounted for 74.8 per cent of the GDP in 2023 — Rs42.6tr (63.3pc) of this was domestic debt. The International Monetary Fund’s (IMF) current estimate of government revenue is 12.5pc of the GDP and expenditures at 20.2pc. The principal reason for the gap is interest paid on debt, which the IMF reckons to be around 8pc of the GDP. Interest on domestic debt currently accounts for more than 80pc of the total interest paid by the federal government.