The Pakistan external debt interest rate averages approximately 4%, not up to 8% as recently reported, according to a clarification issued by the Ministry of Finance.
In a statement released on Sunday, the ministry dismissed commentary suggesting that Pakistan was paying interest of up to 8% on its external loans. Officials said such claims lacked context and did not reflect the overall structure of the country’s external debt portfolio.
The ministry stated that the overall average cost of external public debt stands at around 4%. This reflects the largely concessional nature of Pakistan’s borrowing, with most loans obtained from multilateral and bilateral development partners.
Pakistan’s total external debt and liabilities are currently reported at $138 billion. However, officials stressed that this figure includes a broad range of obligations. These cover public and publicly guaranteed debt, debt of public sector enterprises, bank borrowings, private-sector external debt, and intercompany liabilities.
In contrast, external public (government) debt amounts to approximately $92 billion. Of this, nearly 75% consists of concessional and long-term financing from multilateral institutions, excluding the International Monetary Fund (IMF), and bilateral partners.
Read: Pakistan Government Debt Rises to Rs78.5 Trillion by December 2025
Only about 7% of the external public debt comprises commercial loans, while another 7% relates to long-term Eurobonds. Given this composition, the ministry described the claim of “up to 8%” interest as misleading.
Pakistan’s Interest Payments Breakdown
The Ministry of Finance noted that interest payments on public external debt increased from $1.99 billion in fiscal year 2022 to $3.59 billion in fiscal year 2025. This represents an 80.4% increase, not 84% as previously reported.
In absolute terms, interest payments rose by $1.60 billion during this period.
Citing State Bank of Pakistan records, the ministry provided a breakdown of debt servicing to major creditors. These included the IMF, Asian Development Bank, World Bank, Naya Pakistan Certificates, and external commercial lenders.
Officials emphasised that while interest payments have increased in absolute terms, the rise cannot be attributed solely to growth in the debt stock.
During 2022–23, Pakistan faced significant balance-of-payments pressures, with foreign exchange reserves falling below one month of import cover. In response, the government entered into an IMF Extended Fund Facility (EFF) arrangement and secured additional concessional financing.
