Key Points
- Total external debt and liabilities stand at $138 billion, but government external debt is about $92 billion
- Around 75pc of public external debt is concessional, long-term financing from multilateral and bilateral partners
- Average cost of external public debt estimated at roughly 4pc
- Interest payments rose from $1.99bn in FY2022 to $3.59bn in FY2025
- Increase linked to global interest rate surge and IMF-supported stabilisation programme
ISLAMABAD: Pakistan’s Finance Ministry stated on Sunday that the country’s external debt profile remains predominantly concessional and long-term, refuting the impression of expansive foreign borrowing costing excessive interest and debt servicing
In a statement issued by the Ministry, the government said Pakistan’s total external debt and liabilities stand at $138 billion.
This includes a wide range of obligations such as public and publicly guaranteed debt, liabilities of public sector enterprises, private-sector external debt, bank borrowings and intercompany loans owed to foreign investors.
The Ministry stressed that this aggregate number should not be confused with external public debt, which refers to debt contracted or guaranteed by the federal government. External public debt currently amounts to about $92 billion.
According to the statement, nearly 75 per cent of this external public debt consists of concessional and long-term financing obtained from multilateral development institutions and bilateral partners.
Concessional loans typically carry below-market interest rates and longer repayment periods.
Only about 7 per cent of the debt comprises commercial loans raised from international markets, and another 7 per cent relates to long-term Eurobonds.
Given this composition, assertions that Pakistan is paying interest rates of up to 8 per cent on its external loans are misleading, according to the statement.
It puts the overall average cost of external public debt at roughly 4 per cent, reflecting what it described as the predominantly concessional nature of the borrowing portfolio.
The interest payments on public external debt increased from $1.99 billion in fiscal year 2022 to $3.59 billion, 80.4%, in fiscal year 2025, which was a $1.60 billion increase over the period, in absolute terms.
Citing data from the State Bank of Pakistan, the Ministry provided a breakdown of debt servicing to key creditors.
Payments to the International Monetary Fund totalled $1.50 billion, including $580 million in interest.
Servicing of Naya Pakistan Certificates, a foreign-currency savings instrument aimed at overseas Pakistanis, amounted to $1.56 billion, of which $94 million was interest.
Payments to the Asian Development Bank amount to $1.54 billion, including $615 million in interest, and to the World Bank $1.25 billion, of which $419 million was interest.
External commercial loans amounted to nearly $3 billion, including $327 million in interest payments.
The government said the rise in interest outflows cannot be attributed solely to an expansion in the debt stock.
It noted that although total debt has increased slightly since FY2022, additional inflows have largely come from concessional multilateral sources and from the IMF’s Extended Fund Facility, a medium-term lending programme designed to support countries facing structural balance of payments problems.
Pakistan entered an IMF-supported programme after facing acute balance of payments pressures in 2022–23, when foreign exchange reserves fell to levels covering less than one month of imports.
The authorities stated that the programme, together with financing from other multilateral partners, helped stabilise the external account and rebuild reserves.
The Ministry also cited global monetary tightening as a key factor behind higher interest payments.
In response to a post-pandemic surge in inflation, the Federal Reserve raised its benchmark policy rate from 0.75% to 1.00% in May 2022 to 5.25% to 5.50% by July 2023.
Although rates have since eased, they remain significantly above pre-tightening levels, keeping international borrowing costs elevated for emerging markets such as Pakistan.
The government further stated that it remains committed to prudent debt management and greater transparency, adding that accurate interpretation of debt statistics is essential for informed public debate about the country’s economic outlook.
