Pakistan’s external debt burden has surpassed a staggering $138 billion, according to official figures. In the past three years, Pakistan faced an exponential increase in its interest payments on these loans—surpassing $1.67 billion annually. This surge represents an 84% rise from just two years prior.
Interest alone now amounts to approximately $3.59 billion per year, up from $1.91 billion in the preceding fiscal period. The lion’s share of this debt servicing burden is allocated towards repayment on loans sourced from entities like the International Monetary Fund (IMF), World Bank, Asian Development Bank (ADB), and numerous commercial banks.
Pakistan has been grappling with interest rates that can reach up to 8%. Remarkably, Saudi Arabia and China also bear a portion of their foreign deposits under this umbrella, further adding complexity. In total, Pakistan spends over $13 billion annually on debt servicing—over half of which is earmarked for principal repayment and interest payments.
Last year alone, the country repaid nearly $9.73 billion in principal to its various lenders, including external commercial loans amounting to approximately $3 billion. This significant repayment included $327 million towards interest. On top of this, Pakistan handed over $188 million in interest under the Naya Pakistan Certificates.
Pakistan’s debt woes extend beyond internal financial challenges, as it continues to pay billions annually toward international lenders. Last year, the country disbursed an impressive $2.1 billion to the IMF, with $580 million allocated towards interest payments. Meanwhile, its contributions to the ADB totalled about $1.56 billion—nearly half of which was for interest.
Similarly, Pakistan’s relationship with the World Bank remains strained, as it contributed nearly $1.25 billion last year, with over $419 million dedicated to interest payments. The sheer magnitude and rate at which interest is being paid have placed significant stress on Pakistan’s fiscal health, exacerbating an already challenging situation in terms of managing its debt.