Pakistan’s interest payments on foreign loans have surged 84% over the past three years, reaching $3.59 billion, highlighting the growing cost of external borrowing. Rising reliance on commercial loans and higher global interest rates have added significant pressure on government finances.
Official data shows that by December 2025, Pakistan’s total external debt and liabilities exceeded $138 billion, with public external debt alone at over $91 billion as of June 2025.
During FY2025, the country paid a total of $13.32 billion to service foreign debt:
- $9.73 billion in principal repayments
- $3.59 billion in interest
Major Payments to Global Lenders
Significant repayments were made to multilateral institutions and friendly countries, including:
- $2.10 billion to the IMF
- $1.54 billion to the Asian Development Bank
- $1.25 billion to the World Bank
Commercial loans remained costly, with around $3 billion paid, including $327 million in interest. Payments under Naya Pakistan Certificates reached $1.56 billion, including $188 million interest.
New Borrowing and Net Debt Increase
Despite large repayments, Pakistan took $10.64 billion in new foreign loans during the year:
- $8.65 billion for federal projects
- $1.98 billion for provincial projects
Because new borrowing exceeded repayments, net external debt rose by $1.71 billion over the year.
Economic Implications
Interest rates on foreign loans range between 3% and 8%, depending on lender and loan terms. Most of Pakistan’s external debt is owed to multilateral lenders like the IMF, World Bank, and ADB, along with deposits from China and Saudi Arabia.
Economists warn that rising debt servicing costs reduce funds available for public spending, making it harder for Pakistan to manage the economy without continued foreign support.
