Pakistan pays debt servicing $1.35bn in FY25

September 09, 2025 (MLN): The federal government has paid $1.35 billion in interest on its external debt during the fiscal year ending June 30, 2025, marking a significant 10% decrease from the $1.51bn paid in the previous year, according to State Bank of Pakistan (SBP) data released today.

The $153 million reduction in debt servicing costs provides crucial fiscal relief for the cash-strapped economy, even as the country's borrowing patterns undergo dramatic shifts toward more expensive commercial financing.

The reduction occurred across multiple debt categories, with government debt interest payments falling to $817.6m from $932.3m. 

Interest payments to the International Monetary Fund dropped to $113.69m from $158.32m, reflecting both principal repayments and potentially more favorable terms under ongoing program arrangements.

Federal government interest payments to the IMF fell to $37.28m from $77.91m, while central bank obligations remained relatively stable.

Paris Club debt, owed to major creditor nations, saw substantial reduction with outstanding amounts dropping to $232.76m from $571.45m. 

While interest costs declined, Pakistan's total public debt showed only marginal improvement, falling slightly to $4.04bn from $4.1bn.

The modest debt reduction masked significant compositional changes, with the country eliminating its entire $1bn Euro/Sukuk global bond obligation while dramatically increasing commercial borrowing.

Government debt remained relatively stable at $3.71bn compared to $3.7bn in the previous year, suggesting controlled borrowing at the federal level even as debt servicing obligations shifted.

Despite the positive trend in interest payments, Pakistan faces growing short-term debt servicing pressures.

Principal payments on short-term obligations jumped to $80.11m from just $16m, indicating increased refinancing needs in the near term.

Scheduled banks' borrowing obligations surged to $11.17bn from $9.1bn, highlighting liquidity pressures within the financial system that could translate into higher financing costs ahead.

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