Pakistan Finance Ministry Rejects Misleading 8pc Loan-Interest Claim
Pakistan Finance Ministry Rejects Misleading Claims on External Loan Interest
The Pakistan Finance Ministry Rejects misleading claims about the country paying up to eight per cent interest on external loans, calling these statements incomplete and out of context. According to an official clarification issued on Sunday, the ministry explained that Pakistan’s external debt payments need to be understood with proper detail instead of relying on oversimplified headlines.
The ministry stated that while external debt interest outflows have increased in recent years, the idea that Pakistan is paying 8pc interest across the board is inaccurate. Instead, the average cost of external public debt remains around 4pc, mainly because much of Pakistan’s borrowing comes through concessional financing from institutions such as the Asian Development Bank, World Bank, and other development partners.
To help the public understand these numbers better, the Pakistan Finance Ministry Rejects the way some press commentary presented the data. The ministry said the figures quoted were technically correct but lacked the necessary context to show the full picture.
Understanding Pakistan’s External Debt Structure
According to the detailed clarification, Pakistan’s total external debt and liabilities stand at about $138 billion. This includes several different types of obligations:
Public and publicly guaranteed debt
Debt held by public-sector enterprises
Commercial bank borrowings
Private-sector external debt
Intercompany liabilities owed to direct investors
However, the Pakistan Finance Ministry Rejects confusion between total external liabilities and actual public (government) external debt. Government external debt stands at around $92 billion. This is the number that matters when discussing interest rates on loans taken directly by the government.
These loans come with softer terms, lower interest rates, and extended repayment schedules. Only around 7pc are commercial loans, which naturally carry higher rates. Another 7pc are long-term Eurobonds.
Because of this composition, the Pakistan Finance Ministry Rejects the claim that Pakistan pays interest as high as 8pc overall. The average cost is much lower—roughly 4pc—because concessional financing forms the bulk of the debt.
Correcting the Numbers on Interest Payments
Some reports also misrepresented the rise in interest payments between FY2022 and FY2025. The ministry clarified that public external debt interest payments increased from $1.99bn in FY2022 to $3.59bn in FY2025, which is a rise of 80.4pc, not 84pc.
In absolute terms, interest payments increased by $1.60bn, not $1.67bn. The Pakistan Finance Ministry Rejects the larger figures quoted in some commentary as mathematically incorrect.
To make things more transparent, the ministry also shared the State Bank of Pakistan’s creditor-wise debt servicing numbers during the same period:
The International Monetary Fund received $1.50bn, including $580m in interest
Payments for Naya Pakistan Certificates totaled $1.56bn, with $94m in interest
The Asian Development Bank received $1.54bn, with $615m in interest
The World Bank received $1.25bn, with $419m in interest
External commercial loans amounted to around $3bn, with $327m in interest
These numbers show that while interest payments have gone up, it’s not because Pakistan suddenly shifted to expensive commercial borrowing. Instead, several global and domestic factors pushed the figures upward.
Why Interest Payments Increased
The Pakistan Finance Ministry Rejects the idea that interest payments rose simply because Pakistan borrowed more. Although rates have eased to around 3.75pc, they remain far higher than 2022 levels.
This global tightening increased borrowing costs for all countries, not just Pakistan. As a result, even concessional loans with variable rates became more expensive.
Pakistan’s Steps to Stabilise the Economy
During the economic turbulence of 2022–23, Pakistan faced serious balance of payments pressure, and foreign exchange reserves fell to critically low levels—below one month of import cover. To stabilise the situation, Pakistan entered into the IMF’s Extended Fund Facility (EFF) and mobilised support from multilateral partners.
The Pakistan Finance Ministry Rejects any claim that these steps were unnecessary. According to the ministry, these measures helped rebuild reserves, restore market confidence, and strengthen the external account.
Why Accuracy Matters
In its closing remarks, the ministry said that the Pakistan Finance Ministry Rejects oversimplified or misleading statements about debt because they can distort public debate.
