Pakistan’s external debt nearly doubled over the decade ending in 2025, reaching $135.1 billion from $68.673 billion in 2015, according to the World Bank’s International Debt Report 2026. The report puts the country’s total external debt at $135.107 billion, comprising $107.076 billion in public and publicly guaranteed debt, $17.58 billion in private non-guaranteed debt and $10.45 billion in short-term obligations. Of the public and publicly guaranteed debt, $56.83 billion was owed to multilateral institutions, $42.43 billion to bilateral creditors and $7.8 billion to private creditors. China remained Pakistan’s largest individual creditor with outstanding loans of $22.4 billion, followed by the World Bank at $19.2 billion and the Asian Development Bank (ADB) at $16.83 billion. The report also highlighted differences in borrowing conditions, with loans from official creditors carrying an average maturity of 16 years, a four-year grace period and an average interest rate of 3.6%. Private credit, in comparison, carried an average interest rate of 8.6%, an average repayment period of three years and a one-year grace period.
The report noted that the Middle East, North Africa, Afghanistan and Pakistan (MENAP) region recorded improvements in debt-service and interest ratios, although its external debt-to-gross national income (GNI) ratio increased from 26.7% to 29.4% in 2025. This represented the largest single-year increase among the regions covered, reflecting continued debt accumulation. During the year, China extended the maturities on $2 billion in loans to Pakistan, while the International Monetary Fund (IMF) provided $2.3 billion in new disbursements under the Extended Fund Facility and Resilience and Sustainability Facility arrangements. These financing arrangements were intended to support Pakistan’s longer-term economic stability. The report’s figures highlight the country’s continued reliance on external creditors, including multilateral institutions, bilateral lending partners and private financing sources, as its external debt obligations expanded over the ten-year period.
At the global level, external debt among low- and middle-income countries (LMICs) increased by 5.5% in 2025 to a record $9.4 trillion, marking the sharpest rise in four years. The increase reflected a recovery in bond issuance, a weaker US dollar and renewed interest from private investors in lending to developing economies. However, the return of international capital market financing came with higher borrowing costs, particularly for the poorest countries. External debt among countries eligible for International Development Association (IDA) financing rose by 8.1% to $1.3 trillion, while low-income countries recorded an 8.9% increase to $262.4 billion, representing their largest annual increase since 2020. The weakening US dollar also contributed significantly to the reported rise, accounting for 28.2% of the increase in LMICs’ external public and publicly guaranteed debt. Currency valuation changes increased reported debt balances in several countries despite repayments made during the year.
Private lending also recovered strongly, with LMIC debt owed to private creditors increasing by 5.2% to $5 trillion in 2025, compared with growth of just 0.6% in 2024. Debt owed to bondholders increased by 5.7% to $2.4 trillion, while borrowing from commercial banks and other private creditors rose by 4.7% to $2.7 trillion. The World Bank report attributed the renewed lending activity partly to economic growth, with LMIC economies recording average gross national income growth of 5.1%. Stronger economic performance encouraged lenders to return to developing markets, while governments continued borrowing despite relatively expensive financing conditions. IDA-eligible countries faced particularly high costs, paying an average interest rate of 8.2% on new commitments in 2025, the highest level since the late 1980s. The interest-rate gap between borrowing from official creditors and private lenders for this group widened from 3.4 percentage points in 2016 to 5.5 percentage points in 2025. By comparison, borrowers from the International Bank for Reconstruction and Development secured improved terms, with average interest rates on new commitments declining to 5.5% from 5.8% in the previous year.
Debt servicing remained a major financial pressure for developing economies, with total principal and interest payments among LMICs increasing for the fifth consecutive year to $1.4 trillion in 2025, representing a 1.9% annual rise. Payments to private creditors contributed significantly to the increase, with debt service to bondholders climbing 13.7% to $363.1 billion. Between 2022 and 2025, developing economies paid approximately $436.1 billion more in debt servicing than they received in new financing. However, the trend shifted in 2025 as long-term debt flows moved from a net outflow of $118.4 billion in 2024 to a net inflow of $45.4 billion. The World Bank’s findings show that although international lending conditions improved for some developing economies during 2025, borrowing costs and repayment obligations continued to create pressure, particularly for countries with limited access to concessional financing. Pakistan’s external debt increase forms part of this wider global trend, with its creditor structure, financing terms and growing obligations remaining important factors in assessing the country’s external financial position.
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