Finance Ministry Rejects Claims on Rising External Debt Costs
By Shahzad Paracha :
Pakistan’s Ministry of Finance has dismissed recent media reports concerning the country’s rising external debt payments, clarifying that the majority of its borrowing remains on highly concessional terms.
In a statement released on Sunday, the ministry refuted what it described as “misleading” claims about a surge in interest payments, providing its own breakdown of the nation’s $138 billion external debt and liabilities portfolio.
The clarification follows commentary in the press which suggested that interest payments on external debt had jumped by 84% over the last three years, amounting to an increase of $1.67 billion.
The finance ministry corrected that figure, stating that public external debt interest outflows actually rose by 80.4%, from $1.99 billion in the fiscal year 2022 to $3.59 billion in FY2025. This represents an absolute increase of $1.60 billion, the ministry said, not $1.67 billion.
Officials stressed that the overall average cost of this debt is approximately 4%, underscoring what they termed the “predominantly concessional nature” of the country’s borrowing.
The ministry sought to contextualise the total external debt figure of $138 billion, explaining that it is a broad aggregate. It includes not only public debt but also obligations of public sector enterprises, bank borrowings, private-sector external debt, and intercompany liabilities.
It emphasised that the actual External Public (Government) Debt stands at a significantly lower figure of around $92 billion.
Of this public debt, nearly 75% consists of concessional, long-term financing from multilateral institutions excluding the IMF and bilateral development partners.
“The claim that Pakistan is paying interest on external loans ‘up to 8 per cent’ is misleading,” the statement read, asserting that only about 7% of this debt is composed of commercial loans, with another 7% in long-term Eurobonds.
While acknowledging that interest payments have risen in absolute terms, the ministry attributed this to new inflows from concessional multilateral sources and the IMF’s Extended Fund Facility (EFF), rather than a broad expansion of the debt stock.
Providing a detailed breakdown of recent debt servicing based on State Bank of Pakistan data, the ministry highlighted payments to key international partners. This included $1.50 billion to the IMF (with $580 million in interest), $1.54 billion to the Asian Development Bank ($615 million interest), and $1.25 billion to the World Bank ($419 million interest). Payments on external commercial loans totaled nearly $3 billion, including $327 million in interest.
About Author
