ISLAMABAD: The Ministry of Finance told the National Assembly that it had adopted proactive debt management strategies to reduce the burden of debt servicing and create fiscal space.
The ministry in a written reply during the Question Hour on Friday stated that these steps include strategic shift towards medium- to long-term securities while curtailing short-term issuances, conducting first-ever sovereign debt buybacks, and introducing long-term zero-coupon bonds.
All these measures resulted in interest expense savings exceeding PKR 850 billion in the FY-25. It also enabled the government to reduce budgetary allocation for interest expense from PKR 9.7 trillion in FY-24 to PKR 8.2 trillion in FY-26 budget.
Asif Khan asked whether it is a fact that, according to the Auditor General’s Report 2024-25, only 13 per cent of the federal budget was spent on socio-economic purposes while a major portion went to debt servicing and interest payments.
The finance ministry told the National Assembly that as per the referenced audit report, the total expenditure for Fiscal Year 2023-24 is shown as PKR 39.9 trillion, out of which PKR 8.2 trillion was for debt servicing (20.55 per cent), and PKR 26.4 trillion (66.14 per cent) for principal repayment of loans, while remaining amount was described as expenditure for socio-economic functions (13 per cent).
The finance ministry stated that it is pertinent to add that total development expenditure (PSDP) of the federal government in FY-24 was PKR 732 billion which increased to PKR 1,049 billion in FY-25 (increase of 43 per cent YoY). Similarly, in the second half of FY-2023-24, as inflation started to decline, the government managed to issue securities at rates lower than the policy rate, which caused reduction in interest expense.
Regarding steps to control rising debt, it is important to note that debt is obtained primarily to finance the fiscal deficit.
In the past two fiscal years, the government has been successfully able to generate primary surpluses, which has reduced the overall fiscal deficit.
This will slow down the pace of debt accumulation gradually.Secondly, the government has adopted proactive debt management strategies to reduce the burden of debt servicing and create fiscal space.
