Finance Ministry says
The Ministry
of Finance has dismissed recent claims regarding the country’s external
debt interest payments as inaccurate, clarifying that the average cost of
external public debt is closer to 4%. The ministry also corrected the reported
increase in interest payments, stating that the rise was $1.60 billion, not
$1.67 billion as previously claimed.
In a statement issued Sunday, the Finance
Ministry stated, "Pakistan’s total external debt and liabilities currently
amount to $138 billion. Public external debt interest payments rose from $1.99
billion in FY2022 to $3.59 billion in FY2025, an increase of 80.4%, not 84% as
reported."
The ministry emphasized that the country’s
external debt portfolio remains largely concessional and long-term, with an
average interest rate of about 4%. The increase in interest payments over the
period amounted to $1.60 billion, not $1.67 billion, as claimed by some
reports.
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total external debt stocks amount to $126.942 billion
The clarification follows recent commentary
suggesting that interest payments on external debt had increased by 84% over
three years, with an additional $1.67 billion in interest paid last year alone.
This interest was paid to institutions including the IMF, World Bank, Asian
Development Bank (ADB), and commercial banks.
According to officials, interest rates on
external loans can reach up to 8%, with Saudi Arabia and China receiving
interest on their safe deposits. Including interest, Pakistan’s annual debt
servicing costs amount to $13.32 billion. The net external debt also grew by
$1.71 billion last year.
The Finance Ministry further explained that
the claims presented in the commentary required proper context to avoid
misunderstanding the country’s external debt profile. The total external debt
figure includes a wide range of obligations, including debt from public sector
enterprises, private-sector debt, bank borrowings, and intercompany
liabilities, which should not be confused with External Public (Government)
Debt, which is approximately $92 billion.
Of the total external public debt, around 75%
is made up of concessional and long-term financing from multilateral
institutions and bilateral development partners, excluding the IMF. Commercial
loans account for just 7%, with another 7% in long-term Eurobonds. As a result,
the ministry argued, the claim that Pakistan is paying interest on external
loans “up to 8%” is misleading.
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The statement also provided a breakdown of
debt servicing to specific creditors, including:
·
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, with $327 million in interest payments
While
acknowledging that interest payments have increased in absolute terms, the
ministry stressed that this rise cannot be solely attributed to an increase in
the debt stock. Most of the new debt inflows have come from concessional
sources, including multilateral institutions and the IMF’s Extended Fund
Facility (EFF) under the current IMF-supported program.
Source:
Express Tribune