As I poured over Pakistan’s Budget in Brief 2025-26, released by the Finance Division on June 10, 2025, I felt a mix of hope and frustration. The numbers paint a vivid picture of a nation walking a fiscal tightrope, trying to rein in deficits while grappling with crushing debt and competing priorities. For someone like me, who looks at budgets through a health economics lens, it’s disheartening to see healthcare, a lifeline for Pakistan’s 240 million people, squeezed into the margins. Let’s dive into the budget’s deficits, scrutinize where the money’s going, and unpack what this means for health and the human cost, all while keeping it real about the challenges ahead.
The Deficit Dilemma: Progress, But at What Cost?
The budget projects a federal fiscal deficit of Rs. 6,501 billion (Table 2), down from Rs. 7,444 billion in the revised estimates for FY 2024- 25 (Table 3). With a provincial surplus of Rs. 1,464 billion, the overall deficit shrinks to Rs. 5,037 billion, or 3.9% of GDP (Rs. 129,567 billion, Table 3). This represents a step forward from last year’s 5.6%, signaling fiscal discipline that may appease creditors, such as the IMF. But here’s the rub: this “progress” comes at a steep price. The deficit is plugged with Rs. 6,309 billion in domestic borrowing, Rs. 106 billion* in net external financing, and Rs. 87 billion* in privatization proceeds (Table 9). That’s a lot of IOUs piling up.
The real kicker? Interest payments devour Rs. 8,207 billion (Table 8), a jaw-dropping 47% of total expenditure (Rs. 17,573 billion). Domestic debt servicing (Rs. 7,197 billion) overshadows foreign debt (Rs. 1,009 billion), fueled by instruments like T-Bills, PIBs, and Sukuk (Rs. 3,435 billion in bank borrowing, Table 8). This debt trap is like a black hole, sucking resources away from critical sectors like health, which gets a measly Rs. 31,975 million (Table 11)—just 0.2% of expenditure and 0.02% of GDP. Compare that to the World Health Organization’s recommendation of 5% of GDP for universal health coverage, and it’s clear Pakistan’s priorities are skewed. For families struggling with medical bills—where out-of-pocket costs account for over 60% of health spending (World Bank data)—this feels like a betrayal.
Overspending: Where’s the Money Bleeding?
Let’s break down the budget’s heavy hitters (Table 8) and ask whether they’re justified or just fiscal bloat:
1. Interest Payments (Rs. 8,207 billion, 47% of expenditure)
This is the budget’s biggest sinkhole. Servicing debt isn’t a choice—it’s a legacy of decades of borrowing to cover deficits. Domestic debt, with its high interest rates, is the primary culprit, accounting for Rs. 7,197 billion (Table 19). Imagine what even a fraction of this could do: Rs. 820 billion (10%) could fund 25 new hospitals or vaccinate every child in Pakistan. Instead, it’s paying for past promises, leaving health and education to scrape by. This isn’t just overspending—it’s a structural crisis that demands debt restructuring or aggressive revenue growth.
2. Defense Affairs and Services (Rs. 2,550 billion, 14.5% of expenditure)
Defense spending, up from Rs. 2,181 billion in FY2024- 25 (Table 19), is nearly 80 times the health budget. Security is vital, but in a country battling maternal mortality (186 per 100,000 live births, WHO) and child malnutrition (40% stunting, UNICEF), this imbalance stings. The budget offers no clear rationale for the increase, and without detailed breakdowns, it’s hard to know if every rupee is essential. Could savings from efficiencies, like modernizing procurement or cutting redundancies, bolster health? It’s a tough but necessary question when lives hang in the balance.
3. Grants and Transfers (Rs. 1,928 billion, 11% of expenditure)
Grants include Rs. 150 billion for provinces (e.g., Rs. 52 billion for Sindh’s OZT, Rs. 80 billion for Khyber Pakhtunkhwa’s merged districts), and Rs. 1,778 billion for others, like Pakistan Railways (Rs. 70 billion) and contingent liabilities (Rs. 300 billion, Table 13). Some grants address regional needs, but others—like Rs. 19 billion for the PM Ramzan Package or Rs. 144 billion* for miscellaneous expenditures—feel vague and potentially political. This lack of transparency raises red flags. Redirecting even Rs. 100 billion could double the health budget, funding rural clinics or free medicines for the poor.
4. Subsidies (Rs. 1,186 billion, 6.7% of expenditure)
Subsidies, down from Rs. 1,378 billion (Table 12), are dominated by the power sector (Rs. 1,036 billion, 87% of subsidies), with chunks like Rs. 249 billion for inter-DISCO tariff differentials and Rs. 125 billion for K-Electric. Energy subsidies aim to keep electricity affordable, but they often benefit wealthier households and industries more than the poor. Meanwhile, food subsidies (Rs. 20 billion* for wheat, Table 12) and agriculture-related subsidies (Rs. 22 billion, Table 39) support nutrition—a key health determinant—but are dwarfed by energy costs. The absence of health-specific subsidies (e.g., for medicines or vaccinations) is a glaring gap. Overspending on poorly targeted energy subsidies is a missed chance to invest in health equity.
Health: A Flicker in the Fiscal Gloom
Health gets a paltry Rs. 31,975 million (Table 11), up slightly from Rs. 28,171 million budgeted last year but down from the revised Rs. 52,130 million spent in FY2024- 25. The breakdown is telling:
- Hospital Service: Rs. 24,035 million, the lion’s share, focuses on keeping facilities running.
- Health Administration: Rs. 6,768 million, up from Rs. 5,346 million, hints at efforts to improve governance.
- Public Health Services: A shocking drop from Rs. 24,488 million to Rs. 1,139 million, undermining preventive care for diseases like tuberculosis and hepatitis.
- Medical Products: A measly Rs. 32 million, unchanged, signaling ongoing risks of supply shortages.
The Public Sector Development Programme (PSDP) allocates Rs. 14,344 million to health (Table 17), down from Rs. 24,750 million, limiting new infrastructure or technology. On a brighter note, Social Protection (Rs. 734,187 million, Table 11), including Rs. 722,490 million for the Benazir Income Support Programme (Table 50), indirectly supports health by easing poverty. The Gender, Climate, and Disaster allocations (Table 18) are also promising:
- Gender: Rs. 15,774 million for health and well-being, a big jump from Rs. 638 million, which could target maternal and child health.
- Climate: Rs. 85,435 million for adaptation and Rs. 603,000 million for mitigation, potentially improving water and sanitation access, critical for health.
But these are bandages on a broken system. Health’s 0.2% share of expenditure can’t tackle Pakistan’s health crises, leaving families to bear crushing out-of-pocket costs.
Why the Imbalance Persists
1. Debt Addiction: The Rs. 8,207 billion in interest payments is a symptom of chronic borrowing. Domestic financing (Rs. 6,309 billion, Table 9) and bank borrowing (Rs. 3,435 billion, Table 8) keep Pakistan on a hamster wheel of debt. Without restructuring or relief, health will remain starved.
2. Political Pressures: Defense and grants reflect security and regional priorities, but vague items like Rs. 389 billion for emergency provisions (Table 8) or Rs. 144 billion*\ for miscellaneous grants scream inefficiency. Are these funds solving real problems or buying political loyalty?
3. Subsidy Misfires: The Rs. 1,036 billion in power subsidies is a textbook case of overspending with skewed benefits. Health subsidies could directly reduce out-of-pocket costs, but they’re absent from the budget.
4. Revenue Shortfalls: Tax revenue is up 18.8% to Rs. 14,131 billion (Table 8), but the tax-to-GDP ratio (10.9%) is low for a developing nation. Non-tax revenue (Rs. 5,147 billion, Table 5), like petroleum levies, helps, but it’s not enough to escape borrowing.
The Human Toll
These numbers aren’t just data—they’re about people. Picture a mother in rural Punjab unable to afford prenatal care, a child in Balochistan missing vaccinations, or a family in Sindh bankrupted by a hospital bill. The budget’s obsession with debt and defense feels like a gut punch to these families. Social protection like BISP is a lifeline, but it’s no substitute for a healthcare system that works. The *3.9% deficit-to-GDP* ratio might look good on paper, but it means little to someone choosing between medicine and food.
A Healthier Path Forward
To break the deficit cycle and prioritize health, Pakistan could:
- Restructure Debt: Negotiate lower interest rates or longer repayment terms to ease the Rs. 8,207 billion burden, freeing up funds for health.
- Trim Defence Fat: Review defense spending for efficiencies, redirecting even Rs. 100 billion to health without compromising security.
- Smart Subsidies: Shift Rs. 500 billion* from power subsidies to health-specific programs, like free medicines or subsidized insurance for the poor.
- Boost Taxes: Raise the tax-to-GDP ratio by taxing untapped sectors (e.g., agriculture, luxury goods), leveraging the Rs. 14,131 billion* tax base to reduce borrowing.
- Double Health Funding: Aim for 2% of GDP in health spending within five years, starting with Rs. 60 billion to bolster primary care and public health.
- Demand Transparency: Justify every rupee in grants and emergency provisions to curb waste and build trust.
Pakistan’s 2025-26 budget is a valiant attempt to tame the deficit beast, with a 3.9% GDP target showing restraint. But the obsession with debt servicing and defense, at the expense of health’s 0.2% share, feels like a missed opportunity. As a health economist, I’m both hopeful and exasperated—hopeful for social protection and climate investments but exasperated that health remains a footnote. The government’s trying, but it’s time to stop borrowing big and start healing big. Pakistan’s people deserve a budget that invests in their future, not just their creditors’.
Dr Ziauddin Islam
Health Economist & Global Public Health Advocate
Islamzia.shaikh@gmail.com