Pakistan Debt Clarification: Finance Ministry Disputes 8% Interest Rate Claims

Islamabad – The Pakistan Ministry of Finance has refuted claims circulating in recent press commentary regarding high interest rates on the country’s external loans. The ministry clarified that reports suggesting interest payments of up to 8% are “misleading,” providing a more detailed breakdown of Pakistan’s debt structure and associated interest costs.

Debt Composition and Current Standing

As of February 22, 2026, Pakistan’s total external debt and liabilities stand at $138 billion [Dawn]. However, the ministry emphasized the importance of distinguishing between this aggregate figure and external public (government) debt, which currently amounts to approximately $92 billion [Dawn], [Geo TV], [Radio Pakistan].

Concessional vs. Commercial Borrowing

A significant portion – nearly 75% – of Pakistan’s external public debt is comprised of “concessional and long-term financing” obtained from multilateral institutions (excluding the International Monetary Fund) and bilateral development partners [Dawn], [Geo TV]. Only approximately 7% consists of commercial loans, with another 7% relating to long-term Eurobonds [Dawn], [Geo TV].

Interest Rate Clarification

The Ministry of Finance stated that the overall average cost of external public debt is approximately 4% [Geo TV], [Radio Pakistan]. This reflects the predominantly concessional nature of the borrowing portfolio. The ministry clarified that public external debt interest outflows rose by 80.4% between fiscal years 2022 and 2025, not 84% as previously reported [Dawn], [24 News HD].

Interest Payment Breakdown (2022-2025)

The ministry provided a breakdown of interest payments to specific creditors during the period:

• IMF: $1.50 billion (including $580 million in interest)
• Naya Pakistan Certificates: $1.56 billion (including $94 million in interest)
• Asian Development Bank: $1.54 billion (including $615 million in interest)
• World Bank: $1.25 billion (including $419 million in interest)
• External Commercial Loans: Nearly $3 billion (including $327 million in interest)

Factors Influencing Interest Payments

The increase in interest payments is attributed to both an increase in the debt stock and prevailing global interest rate dynamics. Pakistan faced balance of payments pressures in 2022-23, leading to the need for an IMF Extended Fund Facility (EFF) arrangement and financing from multilateral partners [Radio Pakistan]. The US Federal Reserve’s raising of the federal funds rate from 0.75-1.00% in May 2022 to 5.25–5.50% by July 2023, though now moderated to around 3.75%, has contributed to higher international borrowing costs [Dawn].

Commitment to Debt Management

The Ministry of Finance reaffirmed the government’s commitment to prudent debt management, transparency, and strengthening Pakistan’s macroeconomic stability [Dawn], [Radio Pakistan].