Claim about Pakistan paying interest on external loans of up to 8pc is ‘misleading’: finance ministry
The Ministry of Finance on Sunday dismissed claims that Pakistan was paying up to eight per cent interest on external loans as “misleading,” clarifying that public external debt interest outflows rose by 80.4 per cent between fiscal years 2022 and 2025, not 84pc.
The ministry issued a clarification in response to “recent press commentary” on Pakistan’s external debt, saying the figures cited needed context to provide an “accurate and comprehensive understanding” of the country’s debt and interest payments.
“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,” the statement said.
“It is therefore important to distinguish this aggregate figure from external public (government) debt, which amounts to approximately $92bn,” it added.
It said that of total external public debt, nearly 75pc comprised “concessional and long-term financing” obtained from multilateral institutions (excluding the International Monetary Fund) and bilateral development partners.
Only about 7pc of this debt consists of commercial loans, while another 7pc relates to long-term Eurobonds, it added.
“In light of this composition, the claim that Pakistan is paying interest on external loans of ‘up to 8pc’ is misleading. The overall average cost of external public debt is approximately 4pc, reflecting the predominantly concessional nature of the borrowing portfolio,” it stated
With respect to interest payments, it clarified that public external debt interest outflows increased from $1.99bn in fiscal year 2022 to $3.59bn in fiscal year 2025, representing an increase of 80.4pc, not 84pc as reported.
“In absolute terms, interest payments rose by $1.60bn over this period, not $1.67bn.”
The finance ministry also referred to the State Bank of Pakistan’s records, saying the total debt servicing payments to specific creditors during the period under reference were as follows: the IMF received $1.50bn, of which $580 million constituted interest; Naya Pakistan Certificates payments totaled $1.56bn, including $94m in interest; the Asian Development Bank received $1.54bn, including $615m in interest; the World Bank received $1.25bn, including $419m in interest; and external commercial loans amounted to nearly $3bn, of which $327m 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 fiscal year 2022, 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 maintained.
The finance ministry said that during 2022–23, Pakistan had 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 further said that the increase in interest payments reflected prevailing global interest rate dynamics.
“In response to the inflation surge of 2021–22, the US Federal Reserve raised the federal funds rate from 0.75-1.00pc in May 2022 to 5.25–5.50pc by July 2023.
Although rates have since moderated to around 3.75 pc, 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 finance ministry said.
It concluded that the government remained 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.”
