The Ministry of Finance has issued a comprehensive clarification regarding Pakistan’s external debt, asserting that the country’s borrowing profile remains predominantly concessional and long-term.
The ministry addressed recent media commentary, clarifying that while total external liabilities stand at $138 billion, the actual External Public (Government) Debt is nearly $92 billion. The remaining balance includes private sector obligations, bank borrowings, and liabilities of Public Sector Enterprises.
“The Ministry of Finance wishes to clarify 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.
“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 Debt, which amounts to approximately $92 billion,” read a statement issued by the Finance Division.
Of the total External Public Debt, it said, nearly 75 per cent comprises concessional and long-term financing obtained from multilateral institutions (excluding the IMF) and bilateral development partners. Only about 7 per cent of this debt consists of commercial loans, while another 7 per cent 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, read the statement. The overall average cost of External Public Debt is about 4 per cent, 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 per cent, not 84 per cent as reported. In absolute terms, interest payments rose by $1.60 billion over this period, not $1.67 billion,” the Finance Division stated.
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 programme, it said.
During 2022–23, the ministry said, 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 added.
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 per cent in May 2022 to 5.25–5.50 per cent by July 2023. Although rates have since moderated to around 3.75 per cent, 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 government 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,” the ministry stated.
