Pakistan’s $138 billion external liabilities mostly concessional, says Finance Ministry

The Ministry of Finance has clarified that certain assertions made in a recent press commentary regarding the country’s external debt position and associated interest payments. The figures presented in the commentary require contextual explanation to ensure an accurate and comprehensive understanding of Pakistan’s external debt profile.

The ministry said that Pakistan’s total external debt and liabilities currently stand at $138 billion. This figure, however, encompasses a broad range of obligations, including public and publicly guaranteed debt, debt of Public Sector Enterprises (both guaranteed and non-guaranteed), bank borrowings, private-sector external debt, and intercompany liabilities to direct investors. It is therefore important to distinguish this aggregate figure from External Public (Government) Debt, which amounts to approximately $92 billion.

Of the total External Public Debt, nearly 75% comprises concessional and long-term financing obtained from multilateral institutions (excluding the IMF) and bilateral development partners. Only about 7% of this debt consists of commercial loans, while another 7% relates to long-term Eurobonds. 

In light of this composition, the claim that Pakistan is paying interest on external loans “up to 8%” is misleading. The overall average cost of External Public Debt is approximately 4%, reflecting the predominantly concessional nature of the borrowing portfolio.

With respect to interest payments, public external debt interest outflows increased from $1.99 billion in FY2022 to $3.59 billion in FY2025, representing an increase of 80.4%, not 84% as reported. In absolute terms, interest payments rose by $1.60 billion over this period, not $1.67 billion.

According to the State Bank of Pakistan’s records, total debt servicing payments to specific creditors during the period under reference were as follows: the International Monetary Fund received $1.50 billion, of which $580 million constituted interest; Naya Pakistan Certificates payments totaled $1.56 billion, including $94 million in interest; the Asian Development Bank received $1.54 billion, including $615 million in interest; the World Bank received $1.25 billion, including $419 million in interest; and external commercial loans amounted to nearly $3 billion, of which $327 million represented interest payments.

While interest payments have increased in absolute terms, this rise cannot be attributed solely to an expansion in the debt stock. Although the overall debt stock has increased slightly since FY2022, the additional inflows have primarily originated from concessional multilateral sources and the IMF’s Extended Fund Facility (EFF) under the ongoing IMF-supported program.

During 2022–23, Pakistan faced heightened balance of payments pressures, which led to foreign exchange reserves falling below one month of import cover. In response, the Government entered into an IMF EFF arrangement and mobilised financing from multilateral and other concessional partners. These measures played a critical role in rebuilding foreign exchange reserves and strengthening the country’s external account position.

It is also important to note that the increase in interest payments reflects prevailing global interest rate dynamics. In response to the inflation surge of 2021–22, the U.S. Federal Reserve raised the federal funds rate from 0.75-1.00% in May 2022 to 5.25–5.50% by July 2023. Although rates have since moderated to around 3.75%, they remain significantly higher than 2022 levels. This global monetary tightening has kept international borrowing costs elevated and contributed to higher external interest payments.

The ministry said that it remains committed to prudent debt management, transparency, and the continued strengthening of Pakistan’s macroeconomic stability. Accurate representation of debt statistics is essential to informed public discourse, and stakeholders are encouraged to consider the full context of Pakistan’s external debt structure and evolving global financial conditions.