Pakistan’s interest expenses expected to drop by Rs1.3trn in FY2025

In a positive turn for Pakistan’s fiscal landscape, the country’s interest expenses are expected to drop by Rs1.3 trillion in FY2025, following the State Bank of Pakistan’s (SBP) recent cuts in the policy rate. 

With inflation easing, the SBP’s Monetary Policy Committee (MPC) has reduced the interest rate by 7% since June 2024, a move that is set to lower the government’s interest payments on public debt significantly.

In his post-MPC briefing, SBP Governor Jameel Ahmed highlighted that the total interest expenses for FY25 are now projected at Rs8.5 trillion, down from the originally budgeted Rs9.8 trillion. This reduction, approximately 1% of GDP, offers a substantial fiscal relief amid challenging economic conditions. 

The reduction in debt-servicing costs provides the government with flexibility to reallocate funds toward development and welfare initiatives, thus alleviating the financial strain that rising interest costs had previously imposed on fiscal policy.

These developments, supported by a more stable inflation rate, are anticipated to assist Pakistan in maintaining a balanced fiscal outlook while promoting economic stability and growth.