Cost of fiscal stability
EDITORIAL: Since 2022, all budgets have been presented under the premiership of Shehbaz Sharif. The report card is mixed. Overall public debt and liabilities reached Rs98 trillion, or 77 percent of GDP. Within this, gross public debt stood at Rs86.7 trillion, up 76 percent over the last five years. However, in terms of GDP, public debt has declined from 73.9 percent in FY22 to 68.3 percent,…
Since 2022, Pakistan's federal budgets have been managed under Shehbaz Sharif's leadership. The nation's fiscal health, however, remains a mixed bag. Public debt and liabilities have reached Rs98 trillion, or 77% of GDP, with gross public debt at Rs86.7 trillion, a 76% increase over the past five years. Despite this, public debt has decreased as a percentage of GDP, falling from 73.9% in FY22 to 68.3% in FY26 due to three consecutive years of primary fiscal surpluses.
The government's debt servicing costs have also decreased, from consuming 85% of net federal revenues in FY22 to 66% in FY26. Yet, this progress may be short-lived. The government has resorted to raising taxes and reducing development spending to generate revenue and service debt. These actions could stifle private investment and hinder growth.
Furthermore, Pakistan's debt-to-GDP ratio is not particularly high, but its average interest payments to revenues ratio is an outlier, indicating unsustainable debt dynamics. Addressing structural weaknesses, such as broadening the tax base, improving social spending, reducing regulatory burdens, enhancing governance, and boosting national savings, is crucial for long-term growth.
However, these areas show little progress. While the government highlights improvements in headline numbers like the debt-to-GDP ratio and reduced debt servicing costs, concerns remain over poverty, dwindling investment, and eroding confidence in economic stability. The true cost of these fiscal adjustments is yet to be fully realized.
Written by urgent.news from Business Recorder's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
