Pakistan’s Ministry of Finance has issued a detailed clarification regarding the country’s external debt position, stating that widely circulated figures require context to avoid misinterpretation of the overall liability profile and associated interest payments. The ministry emphasized that while Pakistan’s total external debt and liabilities currently stand at $138 billion, this headline number encompasses a broad spectrum of obligations and should not be conflated with the government’s direct external public debt exposure.
According to the ministry, the $138 billion figure includes 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. In contrast, External Public (Government) Debt amounts to approximately $92 billion, which represents the core sovereign obligation. Officials stressed that distinguishing between aggregate external liabilities and government-specific debt is critical for a balanced understanding of Pakistan’s financial position.
Of the $92 billion in external public debt, nearly 75% consists of concessional and long-term financing secured from multilateral development institutions, excluding the International Monetary Fund, as well as bilateral development partners. Only around 7% of this portfolio comprises commercial loans, while another 7% is attributed to long-term Eurobonds. This composition, the ministry noted, reflects a borrowing strategy largely anchored in lower-cost, development-focused financing rather than high-yield market instruments.
In this context, the assertion that Pakistan is paying interest rates “up to 8%” on its external loans was described as misleading. The overall average cost of external public debt stands at approximately 4%, underscoring the concessional nature of the majority of obligations. Officials argued that selective references to higher-cost instruments fail to capture the blended rate across the full debt portfolio.
Interest payment trends were also addressed in the clarification. Public external debt interest outflows rose from $1.99 billion in FY2022 to $3.59 billion in FY2025, marking an increase of 80.4%, not 84% as previously reported. In absolute terms, the increase amounted to $1.60 billion over the period rather than $1.67 billion. The ministry indicated that while the rise is significant, it must be interpreted in the context of global financial conditions and structural shifts in international borrowing costs.
Data from the State Bank of Pakistan details debt servicing flows to key creditors during the period under review. Payments to the International Monetary Fund totaled $1.50 billion, including $580 million in interest. Naya Pakistan Certificates accounted for $1.56 billion, with $94 million in interest. The Asian Development Bank received $1.54 billion, including $615 million in interest, while the World Bank was paid $1.25 billion, of which $419 million represented interest. External commercial loans amounted to nearly $3 billion in servicing, including $327 million in interest payments.
The ministry highlighted that the increase in interest outflows cannot be attributed solely to a rise in the overall debt stock. Although the stock has grown modestly since FY2022, incremental inflows have primarily originated from concessional multilateral sources and the IMF’s Extended Fund Facility under the ongoing stabilization program. These inflows were mobilized during a period of acute balance of payments stress in 2022–23, when foreign exchange reserves fell below one month of import cover. Engagement with the IMF and development partners played a key role in rebuilding reserves and stabilizing the external account.
Global monetary tightening was cited as a major external factor influencing borrowing costs. In response to inflationary pressures in 2021–22, the U.S. Federal Reserve increased the federal funds rate from 0.75–1.00% in May 2022 to 5.25–5.50% by July 2023. Although rates have eased to around 3.75%, they remain significantly elevated compared to pre-tightening levels, sustaining higher international financing costs.
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