Islamabad [Pakistan], January 22 (ANI): Interest expenses in Pakistan have increased to Pakistani Rupees (PKR) 2.57 trillion in the first half of this fiscal year, amounting to 65 per cent of the annual debt servicing budget, and is forcing the Pakistan government to reduce its other expenses, except those on defence, The Express Tribune reported.

The development comes amid the government’s reluctance to opt for debt restructuring.

With a net income of PKR 2.5 trillion, Pakistan’s total spending on debt servicing and defence reached over PKR 3.2 trillion more than the government’s net income, which indicates that Pakistan will remain debt trapped as the tax collection has increased, however, the expenses have not been reduced, The Express Tribune reported.

In comparison to a massive expenditure of PKR 3.2 trillion on debt servicing and defence, only PKR 147 billion was spent on development, the report said, adding that the expenditure on development is 49 per cent less in comparison to the previous fiscal year.

Citing sources in the Ministry of Finance, the news report said there was an alarming rise of 77 per cent in the cost of interest on the federal government debt stock during the July-December period of the current fiscal year.

The new provisional details have suggested that there has been a cumulative reduction of 15 per cent in all other non-development expenditures, excluding defence due to the precarious situation. The development expenses were reduced by 50 per cent for other expenses, The Express Tribune reported citing government sources.

Pakistan’s Finance Ministry has given about PKR 2.57 trillion in interest costs, which shows a rise of PKR 1.1 trillion or 77 per cent, The Tribune reported citing sources.

During the current fiscal year, the government had budgeted PKR 3.95 trillion for interest expenses but 65 per cent of it has been used in just six months, it added.

Amid the high cost of debt servicing, the Monetary Policy Committee of the central bank is also due to hold a meeting on Monday to review the possibility of further increasing its interest rate to control inflation and attract foreign inflows.

Earlier this month, Pakistan’s Finance Minister Ishaq Dar said the cost of debt servicing could rise to about PKR 5 trillion in this fiscal year, which amounts to over half of this year’s total budget of PKR 9.6 trillion. Citing sources, the news report said Pakistan spent PKR 638 billion on defence in six months, excluding military pensions and expenditure on the armed forces development programme. The annual budget is PKR 1.563 trillion and the six-month expenditure is as per the allocation.

In the current fiscal year, the government’s total expenditure increased to nearly PKR 4.7 trillion. However, the current expenditure of the government increased to more than PKR 4.5 trillion, as per the news report.

Provisional figures reveal that the federal budget deficit reached around PKR 2.2 trillion in the first six months of the current fiscal year, The Express Tribune reported citing sources.

The federal budget deficit, the gap between expenses and revenues, amounted to 2.5 per cent of the GDP, it added. (ANI)