SUMMARY of the Article “Debt trap,” Editorial, Dawn, May 30th, 2024

Pakistan’s debt situation has escalated significantly, resulting in immense pressure on the national budget. The fiscal deficit has averaged 7.3% of the GDP over the past five years, contributing to a national debt of Rs78.9 trillion, comprising Rs43.4 trillion in domestic debt and Rs32.9 trillion in external loans. This has created a debt trap where the country must continuously borrow to repay existing debts. Consequently, debt servicing costs have soared, with the latest estimates rising from Rs7.3 trillion to Rs8.3 trillion for the current fiscal year. The finance ministry’s Mid-Year Budget Review Report indicates a 64% increase in debt payments, reaching Rs4.2 trillion in the first half of the fiscal year. This surge is attributed to both the growing debt stock and a record-high interest rate of 22%, which has significantly increased the cost of domestic debt. The report highlights that domestic debt payments constitute nearly 90% of total debt servicing costs. The high » Read More…