The majority of Pakistan’s external debt is still long-term and concessional.
The Ministry of Finance seeks to elucidate certain claims presented in a recent press commentary concerning the nation’s external debt status and related interest obligations.
The data provided in the commentary necessitates contextual clarification to guarantee an accurate and thorough 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 from governmental Sector Enterprises (both guaranteed and non-guaranteed), bank borrowings, private-sector external debt, and intercompany liabilities to direct investors.
It is essential to differentiate this total from External Public (Government) Debt, which is around $92 billion.
Approximately 75 percent of the total External Public Debt consists of concessional and long-term funding 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. The assertion that Pakistan is incurring interest on external loans “up to 8 percent” is deceptive.
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 FY2022 to $3.59 billion in FY2025, reflecting an increase of 80.4 percent, rather than the claimed 84 percent.
In absolute terms, interest payments increased by $1.60 billion during this period, not $1.67 billion.
According to the State Bank of Pakistan’s records, total debt servicing payments to designated creditors during the specified period were as follows: the International Monetary Fund received $1.50 billion, of which $580 million was interest; Naya Pakistan Certificates payments totaled $1.56 billion, including $94 million in interest; the Asian Development Bank received $1.54 billion, with $615 million in interest; the World Bank received $1.25 billion, comprising $419 million in interest; and external commercial loans amounted to nearly $3 billion, of which $327 million represented interest payments.
Although interest payments have risen in absolute terms, this growth cannot be exclusively ascribed to an expansion of the debt stock. Despite a minor increase in the overall debt stock during FY2022, the new inflows have predominantly come from concessional multilateral sources and the IMF’s Extended Fund Facility (EFF) associated with the current IMF-supported program.
In 2022–23, Pakistan experienced intensified balance of payments challenges, with in foreign exchange reserves declining to less than one month of import coverage.
In response, the Government engaged in an IMF Extended Fund Facility arrangement and secured financing from multilateral and other concessional partners.
These actions were important in restoring foreign exchange reserves and enhancing the nation’s external account status.
The rise in interest payments also signifies the current global interest rate trends.
In reaction to the inflation escalation of 2021–22, the U.S. 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.
Despite a subsequent moderation to approximately 3.75 percent, rates continue to be markedly elevated compared to 2022 levels.
The global monetary tightening has maintained elevated international borrowing rates and increased external interest payments.
The Government is dedicated to responsible debt management, transparency, and the ongoing enhancement of Pakistan’s macroeconomic stability.
Precise depiction of debt numbers is crucial for informed public dialogue, and stakeholders are urged to take into account the comprehensive context of Pakistan’s foreign debt framework and the changing global financial landscape.