The government refutes allegations regarding the payment of up to 8% interest on foreign loans as misleading.

The finance ministry on Sunday refuted as “misleading” assertions that the nation is incurring interest rates of up to 8 percent on foreign loans, clarifying that the overall average cost of external public debt is roughly 4 percent.

On Sunday, the finance ministry provided clarification in response to a previous news commentary over the nation’s external debt status and related interest payments, stating that the statistics necessitated contextual elucidation for a precise comprehension of Pakistan’s external debt profile.

Pakistan’s aggregate external debt and liabilities presently amount to $138 billion. This figure includes a wide array of commitments, such as governmental and publicly guaranteed debt, debt of governmental Sector Enterprises (both guaranteed and non-guaranteed), bank borrowings, private-sector external debt, and intercompany liabilities to direct investors.

“Consequently, it is essential to differentiate this total from External Public (Government) Debt, which is approximately $92 billion,” it stated.

“Approximately 75 percent of the total External Public Debt consists of concessional and long-term financing sourced from multilateral institutions (excluding the IMF) and bilateral development partners.”

Approximately 7 percent of this debt comprises commercial loans, while an additional 7 percent pertains to long-term Eurobonds. This assertion suggests that Pakistan is incurring interest on external loans at rates ‘up to 8 percent,’ which is inaccurate.

The average cost of External Public Debt is roughly 4 percent, indicating the mostly concessional character of the borrowing portfolio.

Regarding interest payments, public foreign debt interest outflows rose from $1.99 billion in Fiscal Year (FY) 2022 to $3.59 billion in FY 2025, indicating a rise of 80.4 percent, less than the claimed 84 percent. In absolute terms, interest payments increased by $1.60 billion throughout this period, not $1.67 billion, it stated.

The ministry stated, “Although interest payments have risen in absolute terms, this increase cannot be exclusively ascribed to a growth in the debt stock.”

“Despite a slight increase in the overall debt stock since FY2022, the additional inflows have predominantly come from concessional multilateral sources and the IMF’s Extended Fund Facility (EFF) as part of the current IMF-supported program.”

The rise in interest payments is indicative of current global interest rate trends.

In reaction to the inflation escalation in 2021–22, the US Federal Reserve elevated the federal funds rate from 0.75-1.00 percent in May 2022 to 5.25–5.50 percent by July 2023. The finance minister stated, “Although rates have since decreased to approximately 3.75 percent, they continue to be substantially elevated compared to 2022 levels.”

The administration is dedicated to judicious debt management, transparency, and the ongoing enhancement of Pakistan’s financial stability.