Interest Payments to Eat Up 62% of Pakistan’s Fiscal Revenue: ADB

Pakistan’s interest payments are expected to require a staggering 62 percent of fiscal revenues, up from 41 percent in 2022-23, says the Asian Development Bank (ADB). The bank in its “Asian Development Outlook” stated that in Pakistan, public debt is forecast to decline by 7 percentage points to 70 percent of GDP in 2024–2025. Still, interest payments are expected to require a staggering 62 percent of fiscal revenues, up from 41 percent in 2022-23. The bank further stated that Pakistan also cut policy rates as inflation fell to 11.8 percent in May, down from 38 percent in the same period last year South Asia is on course to largely achieve ADO April 2024 growth forecasts. Downward revisions for GDP growth in Bangladesh and Maldives over the forecast period are offset in 2024 by upward revisions for Bhutan, Nepal, and Pakistan, leaving the region’s 2024 growth forecast unchanged at 6.3 percent. The growth forecast for 2025 is revised down marginally to 6.5 percent. The provisional government estimate of GDP growth in Pakistan for FY2024 (ending 30 June 2024) stood at 2.4 percent, reflecting robust agricultural output due to improved weather conditions and subsidized government credit, among other factors. Although the economic performance in Q1 2024 in Sri Lanka exceeded ADO April 2024 expectations, growth forecasts for 2024 and 2025 are retained as uncertainties remain as the election cycle begins in the latter half of the year. While Afghanistan’s economy is showing signs of recovery, the weak investment climate, tight fiscal space, and waning international humanitarian and basic needs support underlines its fragility. The inflation forecasts for South Asia are nudged up to 7.1 percent in 2024 and maintained at 5.8 percent in 2025. Although inflation forecasts for Bhutan, India, and Pakistan for FY2024 and FY2025 remain the same as in April 2024 of ADO, the inflation projections for Bangladesh and Maldives are now expected to be higher.