Pakistan’s $92bn external debt largely concessional

February 23, 2026 (MLN): Pakistan’s external public (government) debt stands at about $92bn, of which nearly three-quarters is concessional and long-term, the Ministry of Finance said, disputing claims that the country is paying interest rates as high as 8% on its foreign borrowings.

In a clarification issued on Pakistan’s external debt profile, the ministry said the overall average cost of external public debt is around 4%, showing its predominantly concessional composition, according to the press release. 

Of the $92bn in external public debt, about 75% comprises long-term financing from multilateral institutions (excluding the IMF) and bilateral development partners. Commercial loans account for roughly 7%, while another 7% relates to long-term Eurobonds.

Pakistan’s total external debt and liabilities currently stand at $138bn, but this aggregate figure includes public and publicly guaranteed debt, public sector enterprise borrowings (both guaranteed and non-guaranteed), bank borrowings, private-sector external debt, and intercompany liabilities to direct investors.

The ministry said it was important to distinguish this broader number from government external debt when assessing interest costs and repayment risks.

On debt servicing, public external debt interest payments rose from $1.99bn in FY2022 to $3.59bn in FY2025, an increase of 80.4%.

In absolute terms, interest outflows increased by $1.60bn over the period. The ministry said previously cited figures overstated both the percentage and absolute increase.

According to the State Bank of Pakistan, payments to key external creditors during the period included $1.50bn to the International Monetary Fund, of which $580m was interest. Payments on Naya Pakistan Certificates totaled $1.56bn, including $94m in interest.

The Asian Development Bank received $1.54bn, including $615m in interest, while the World Bank received $1.25bn, of which $419m was interest.

External commercial loans amounted to nearly $3bn, with $327m representing interest payments.

The ministry said the rise in interest payments was not solely due to an expansion in the debt stock, which has increased only slightly since FY2022.

Additional inflows largely came from concessional multilateral sources and the IMF’s Extended Fund Facility under the ongoing IMF-supported program, mobilized during a period of acute balance of payments pressure.

During 2022–23, Pakistan’s foreign exchange reserves fell below one month of import cover, prompting authorities to secure financing support from the IMF and other multilateral lenders to stabilize the external account and rebuild reserves.

The increase in external interest payments also reflects global monetary tightening. In response to the 2021–22 inflation surge, the U.S. Federal Reserve raised its policy rate from 0.75–1.00% in May 2022 to 5.25–5.50% by July 2023.

Although rates have since eased to around 3.75%, they remain above 2022 levels, keeping international borrowing costs elevated.

The clarification comes amid heightened scrutiny of Pakistan’s external debt sustainability, debt servicing burden, and reliance on multilateral financing.

With most of the government’s external debt contracted on concessional and long-term terms, the cost structure remains below levels associated with purely commercial borrowing, even as global interest rates and rollover risks continue to shape the country’s external financing outlook.

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