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Economy

Interest payments consume one-third of Pakistan's budget

Over-reliance on loans bodes ill for fiscal sustainability and domestic needs

Pakistan is pouring increased amounts of money into servicing loans, which bodes ill for domestic spending on health care, infrastructure and other areas.   © Reuters

KARACHI -- Fiscal sustainability has become a major issue among political and economic analysts after Pakistan revealed early this month that servicing debt accounts for more than one-third of its federal budget.

Finance Minister Shaukat Tareen in the National Assembly on June 12 announced the fiscal 2021 federal budget of 8.48 trillion rupees ($54 billion). Interest payments on debt, which are expected to grow by 3.9% from the ongoing fiscal year, account for 3.06 trillion rupees, or 36% of budget expenditures. In contrast, the government is only spending 600 billion rupees on subsidies and 100 billion rupees for COVID-19 vaccinations and emergencies.

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