Key Takeaways
- Pakistan has paid $16 billion in interest on foreign loans over the past four years.
- The country’s external debt now stands at around $107 billion.
- The State Bank of Pakistan expects annual interest payments to fall below $3 billion next year.
Pakistan has paid approximately $16 billion in interest on its foreign loans over the past four years, according to State Bank of Pakistan (SBP) Governor Jameel Ahmed. This figure represents an average of about $4 billion annually.
The total external debt of Pakistan now stands at around $107 billion, a significant increase from the $100 billion mark in 2022. Governor Ahmed noted that if Pakistan had not borrowed, its external debt would have been around $116 billion today, primarily due to the interest payments.
Of the $16 billion in interest, about $10 to 11 billion was paid with dollars the SBP bought from the market, not with new loans. Over the same period, the central bank has purchased over $30 billion from the market, which has helped to increase foreign exchange reserves from about $3 billion in early 2023 to around $21.5 billion now.
The external debt has grown by only $5 to 6 billion in the last four years, or about $1 to 1.25 billion annually. Between 2015 and 2022, the debt increased by around $6.5 billion each year.
Governor Ahmed stated that the quality of Pakistan’s debt has improved, with about 80 percent of the external debt now coming from multilateral and bilateral lenders such as the World Bank and the Asian Development Bank, up from 55 percent in early 2023.
The SBP aims to raise foreign exchange reserves to $23 billion by December and $25 billion by June 2027. Governor Ahmed also expects annual interest payments to fall below $3 billion next year, indicating a potential easing of the financial burden.
In a recent press conference, the SBP raised the policy rate by 50 basis points to 12 percent, a move aimed at stabilizing the economy and managing inflation. This decision comes after reports of a sharp rise in Pakistan’s foreign debt interest bill earlier this year.
