Pakistan’s Foreign Debt Interest Bill Jumps 84% in Three Years

Pakistan’s payments on interest for foreign loans have increased sharply over the past three years, rising by 84 percent to $3.59 billion. The increase shows how costly foreign borrowing has become for the country.

Officials say the rise is mainly due to Pakistan relying more on commercial loans, which are more expensive, and higher global interest rates that have pushed up borrowing costs worldwide.

Foreign Debt Crosses $138 Billion

Despite efforts to stabilize the economy, pressure on public finances continues to grow. Official data shows Pakistan’s total external debt and liabilities crossed $138 billion by December 2025.

Out of this, public external debt stood at over $91 billion as of June 2025, according to government documents.

During fiscal year 2025, Pakistan paid a total of $13.32 billion to service its foreign debt. This included:

• $9.73 billion in loan repayments (principal)
• $3.59 billion in interest payments

These large payments have placed a heavy burden on government finances.

Major Payments to Global Lenders

Significant repayments were made to international institutions and friendly countries. These included:

• $2.10 billion to the International Monetary Fund
• $1.54 billion to the Asian Development Bank
• $1.25 billion to the World Bank

Payments were also made to China and Saudi Arabia, including interest on deposited funds.

Commercial loans remained especially expensive. Pakistan paid around $3 billion under such loans, including $327 million in interest alone.

New Borrowing

Payments under Naya Pakistan Certificates reached $1.56 billion, including $188 million in interest.

Despite making large repayments, Pakistan also took new foreign loans worth $10.64 billion during the year.

• $8.65 billion was used for federal government projects
• $1.98 billion went to provincial projects

Because new borrowing was higher than repayments, net external debt increased by $1.71 billion over the year.

Debt Costs Remain a Key Challenge

Interest rates on foreign loans ranged between 3 percent and 8 percent, depending on the lender and loan terms.

Most of Pakistan’s foreign debt is owed to multilateral lenders like the IMF, World Bank, and Asian Development Bank, along with deposits from China and Saudi Arabia.

Economists warn that rising debt payments leave less money for public spending, making it harder for Pakistan to manage its economy without continued foreign support.