The Ministry of Finance on Sunday issued a clarification over recent press reports, emphasizing that the majority of the country’s external public debt comprises concessional and long-term financing and does not entail hefty interest payments.
In a statement, the ministry noted that the country’s total external debt and liabilities currently stand at $138 billion, including public and publicly guaranteed debt, debt of Public Sector Enterprises, 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,” it said.
Of the total External Public Debt, it said, nearly 75% comprises concessional and long-term financing obtained from multilateral institutions 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,” it said, adding 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.
Citing the State Bank of Pakistan’s records, the ministry outlined debt servicing payments to specific creditors during this period: 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,” it emphasized. “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 under the ongoing IMF-supported program,” it added.