The Ministry of Finance on Saturday rejected claims that Pakistan is paying interest rates of up to 8 per cent on its external sovereign loans, terming the assertion misleading and taken out of context. In a statement reported by Dawn, the ministry said that while some commercial borrowings may carry higher rates, the overall average cost of the country’s external public debt remains significantly lower.
According to the ministry, Pakistan’s total external debt and liabilities stand at approximately $138 billion. However, it clarified that external public debt, which refers specifically to government borrowings, is around $92 billion. Of this amount, nearly 75 per cent comprises concessional and long-term loans obtained from multilateral and bilateral development partners on relatively favourable terms.
The statement further noted that only about 7 per cent of the external public debt consists of commercial loans, while another 7 per cent is made up of Eurobonds. Given this composition, the average interest rate on external public debt is estimated at around 4 per cent, contradicting claims that the country is broadly paying rates as high as 8 per cent.
The ministry acknowledged that interest payments on external public debt have increased in recent years. Interest outflows rose from $1.99 billion in fiscal year 2022 to $3.59 billion in fiscal year 2025, marking an increase of more than 80 per cent. It attributed this rise primarily to higher global interest rates following monetary tightening by major central banks in response to post-pandemic inflationary pressures.
Citing data from the State Bank of Pakistan, the ministry provided a breakdown of recent debt servicing figures. Payments to the International Monetary Fund included both principal and interest components, while significant repayments were also made to the Asian Development Bank and the World Bank. Servicing of external commercial loans also formed part of the total outflows.
The finance ministry concluded that any assessment of Pakistan’s external debt burden must take into account the overall structure and concessional nature of the majority of its borrowings, rather than focusing solely on isolated high-interest instruments. It urged accurate interpretation of debt data to ensure informed public debate on the country’s economic position.