The Ministry of Finance has rejected reports suggesting that Pakistan is paying interest rates of up to 8 percent on its external loans, stating that such claims lack proper context and fail to accurately reflect the structure of the country’s external debt portfolio.
In a statement issued on Sunday, the ministry said recent commentary on Pakistan’s external debt position and associated interest payments required contextual clarification to ensure a comprehensive understanding of the country’s obligations. According to the ministry, the overall average cost of external public debt stands at approximately 4 percent, underscoring the predominantly concessional nature of Pakistan’s borrowing mix.
Pakistan’s total external debt and liabilities are currently estimated at $138 billion. However, the ministry emphasized that this aggregate figure includes a wide spectrum of obligations beyond government debt. These include public and publicly guaranteed debt, liabilities of public sector enterprises—both guaranteed and non-guaranteed—bank borrowings, private-sector external debt, and intercompany liabilities owed to direct investors.
The ministry highlighted the distinction between total external liabilities and external public debt, which amounts to approximately $92 billion. Of this external public debt, nearly 75 percent consists of concessional and long-term financing secured from multilateral institutions, excluding the IMF, as well as bilateral development partners. Only around 7 percent comprises commercial loans, while another 7 percent relates to long-term Eurobonds.
“In light of this composition, the claim that Pakistan is paying interest on external loans ‘up to 8 percent’ is misleading,” the ministry stated, reiterating that the weighted average cost remains close to 4 percent due to the high share of concessional funding.
Addressing interest payment trends, the ministry clarified that public external debt interest outflows rose from $1.99 billion in fiscal year 2022 to $3.59 billion in fiscal year 2025, reflecting an increase of 80.4 percent rather than 84 percent as previously reported. In absolute terms, interest payments increased by $1.60 billion over this period, not $1.67 billion.
Citing data from the State Bank of Pakistan, the ministry provided a creditor-wise breakdown of debt servicing during the reference period. The IMF received $1.50 billion, of which $580 million constituted interest. Payments under Naya Pakistan Certificates totaled $1.56 billion, including $94 million in interest. The Asian Development Bank received $1.54 billion, with $615 million representing interest, while the World Bank received $1.25 billion, including $419 million in interest. External commercial loans amounted to nearly $3 billion, of which $327 million was interest.
While acknowledging that interest payments have risen in absolute terms, the ministry stated that the increase cannot be attributed solely to an expansion in the overall debt stock. Although total debt has grown slightly since FY2022, the additional inflows have largely originated from concessional multilateral sources and financing under the IMF’s Extended Fund Facility programme.
During 2022–23, Pakistan experienced severe balance-of-payments pressures that pushed foreign exchange reserves below one month of import cover. In response, the government entered into an IMF EFF arrangement and mobilised additional concessional financing from multilateral partners. These measures, the ministry said, were instrumental in rebuilding reserves and strengthening the country’s external account position.
Reaffirming its commitment to prudent debt management and transparency, the Ministry of Finance stressed that accurate representation of debt statistics is essential for informed public discourse. It urged stakeholders to assess Pakistan’s external debt within the broader context of its composition and evolving global financial conditions, rather than focusing on isolated figures.
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