Pakistan will spend about Rs 30 billion this fiscal year on interest for PIA’s legacy debt.
The figure represents the interest that the federal government must service on the airline’s pre‑privatisation liabilities. The debt, incurred while Pakistan International Airlines was still state‑owned, was transferred to the Treasury when the carrier was sold to private investors. Roughly Rs 26 billion of the principal was moved to the public ledger at the time of privatisation, and the accrued interest on that amount is now slated to hit the national budget.
Because the interest is a non‑discretionary expense, it will be financed from general revenue, meaning every taxpayer ultimately bears the cost. In a fiscal year already strained by high inflation and a widening current‑account gap, an additional Rs 30 billion—equivalent to more than 0.5 percent of the country’s GDP—tightens the fiscal space available for social programmes, infrastructure projects, and subsidies that many Pakistanis rely on.
The debt’s origins date back to a period when PIA operated under a heavy load of unprofitable routes and ageing aircraft, a situation that contributed to its chronic cash shortfalls. The privatisation deal, concluded in 2024, was intended to off‑load those burdens, yet the interest obligation remained with the state. Critics argue that the arrangement effectively handed the private buyer a cleaner balance sheet while leaving the public sector to shoulder the lingering financial fallout.
Economists warn that such hidden liabilities can exacerbate fiscal deficits and undermine confidence in the government's ability to manage public finances. The added interest expense will be reflected in the upcoming budget papers, potentially prompting a reassessment of revenue‑raising measures, including tax adjustments or borrowing, which could further affect households and businesses across the country.
As the fiscal year progresses, parliamentary committees and opposition parties are likely to scrutinise the decision to retain the interest burden, pressing the government for greater transparency on how legacy debts are accounted for and exploring options to mitigate future taxpayer exposure.