Weakening US dollar could push up Pakistan’s external debt-to-GDP ratio despite limited borrowing: report

The recent weakening of the US dollar against major global currencies has raised concerns over Pakistan’s external debt position, as currency movements could push up the country’s external debt-to-GDP ratio despite limited new borrowing, The News reported. 

Pakistan’s external debt and liabilities had hovered around $130 billion in recent years, largely reflecting the strength of the US dollar against currencies such as the euro, Japanese yen, and British pound. With the dollar now showing signs of decline, officials caution that continued currency shifts could inflate the reported size of Pakistan’s external debt in the current quarter.

According to the Debt Policy Statement prepared by the Ministry of Finance for submission to parliament, external debt rose by 6% year on year to $91.8 billion as of end-June 2025, an increase of $5 billion. During the first quarter of FY26, external debt declined marginally by 0.4%, or $0.35 billion, to $91.4 billion by the end of September 2025.

The statement shows that 56% of Pakistan’s external debt is sourced from multilateral and bilateral lenders. Borrowing from multilateral development partners, including the International Monetary Fund, increased by 8.7%, or nearly $4 billion, during the period under review.

In addition, borrowing from commercial banks rose by $1.6 billion, largely due to a $1 billion loan secured against an Asian Development Bank policy-based guarantee.

Officials said the debt profile highlights Pakistan’s exposure to global currency movements, as fluctuations in the US dollar can significantly alter the rupee value of external liabilities even in the absence of fresh borrowing.