Pakistan to spend 55pc of fiscal year 2025 revenue on interest payments: Moody's

Pakistan will spend more than half of its revenue for interest payments on foreign loans, said the international rating agency Moody’s on Friday.

Moody’s comment came two days after the budget for fiscal year 2024-25 was presented by Finance Minister Muhammad Aurangzeb in the National Assembly.

“The government spends more than half its revenue on interest payments, indicating very weak debt affordability which drives high debt sustainability risks,” highlighted Moody’s.

“About 55pc of fiscal year 2025 revenue (Rs9.8 trillion) is earmarked for interest payments on government’s debt,” it added.

The global rating agency said the government set the targeted GDP growth rate at 3.6 percent to secure fresh loan programme from the International Monetary Fund (IMF).

“However, it will be the government’s ability to sustain reform implementation that will be key to allowing Pakistan to meet its budget target and continually unlock external financing to needs leading to durable easing of liquidity risks,” it stated in the report. 

It said at a time when people were dealing with high inflation, dependency on tax-generated revenue and GDP growth for financial stability was likely to be caused by social problems.

Commenting on the increase in the country's income, Moody's said that the revenue will increase 40 percent due to the increase in taxes.