Pakistan plans to spend PKR 8.05tn on interest payments in 2026–27. Against total Federal expenditure of PKR 18.77tn, that is 43%—more than two rupees in five. Few numbers explain the budget’s narrow range of motion more clearly.
Most of the burden is domestic. The Annual Budget Statement allocates PKR 6.98tn to servicing domestic debt and PKR 1.07tn to foreign debt. This matters because the pressure is not merely a story about the exchange rate or foreign creditors; it is rooted in the cost and stock of borrowing at home.
Debt service is also different from principal repayment. The statement records principal repayments in its wider cash-flow tables, but these are financing flows rather than part of the PKR 18.8tn headline expenditure control used here. Combining them would inflate spending and blur the distinction between paying interest and refinancing liabilities.
The opportunity cost is visible beside the development budget. The Federal PSDP is PKR 1.00tn. Interest payments are therefore about 8.1 times as large. That ratio is not proof that every development rupee is productive, but it captures the scale of the contest between inherited obligations and future capacity.
The decisive variables now lie partly outside the annual budget: interest rates, debt maturities, the exchange rate and the credibility of revenue collection. Until those pressures ease, even an energetic policy agenda will have to operate inside a fiscal envelope largely designed by yesterday’s borrowing.
