AROUND the same time last year, I wrote the economy has reached what I called “peak stability”. This was a stage where all the measures taken to stabilise the economy had delivered their results, and had now reached the end of their line. A few indicators had begun to show a little stress, but around the middle of the year, in June 2025 specifically, a large inflow of almost $5.25 billion suddenly shored up the reserves and allowed the government to end the fiscal year with their State Bank reserves almost $500 million above the target set in the IMF programme.

2025 saw a moderate trade deficit and surging remittances, which helped the current account balance significantly. Between January and November, the months for which data is available, the trade deficit came in around $30.5bn while remittances (including other transfers) came in at $38.8bn. Seems like a nice balance there, until you realise that something ate up $8bn out of the balance-of-payments because the overall surplus was just about $263m.

That something was interest payments on external debts. In 11 months of 2025, Pakistan paid $7.1bn in interest payments on its external debt. For almost a decade, from 2013 to 2022, this figure oscillated between $1.5bn to $4.0bn. Then it began to climb. Some of the increase was due to rising interest rates as the returns on 10-year US Treasury paper spiked from a Covid-era low of 1.44 per cent to........

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