Pakistan pays $3.23 billion in interest as foreign debt hits $98bn

Pakistan paid more than $3.23 billion in interest on its external public debt during the financial year 2025-26, as the country’s total foreign debt climbed to approximately $98.08 billion, highlighting the growing financial pressure of servicing international loans.

According to the Ministry of Economic Affairs’ (MEA) annual report on Foreign Economic Assistance, released on Wednesday, Pakistan paid $14.436 billion in total external debt servicing during the year ending June 30, 2026. This included $11.198 billion in principal repayments and $3.238 billion in interest payments.

The report showed that Pakistan received $16.16 billion in external financing during FY26 but repaid around $14.44 billion in foreign loans. Despite these repayments, the country’s external public debt increased by approximately $6.28 billion, or 6.84 per cent, compared with $91.795 billion at the end of FY25.

Pakistan had set a foreign financing target of $19.923 billion for FY26. However, actual disbursements reached only 81 per cent of the target, leaving a shortfall of around 19 per cent.

The government secured fresh financing commitments worth $8.951 billion during the financial year, according to the report.

A substantial portion of the received funds, approximately $9.375 billion, was allocated for budgetary support and balance-of-payments requirements. The financing was intended to address fiscal imbalances, strengthen foreign exchange reserves and help stabilise the Pakistani rupee.

Naya Pakistan Certificates contributed $3.05 billion, accounting for 33 per cent of this financing, while time deposits from friendly countries provided another $3 billion, or 32 per cent. Foreign commercial banks and bonds jointly accounted for 31 per cent, while the International Monetary Fund contributed the remaining 4 per cent.

Project financing amounted to $3.435 billion, while programme financing stood at $1.329 billion and commodity financing reached $2.019 billion.

The report further revealed that multilateral and bilateral development partners accounted for $59.931 billion of Pakistan’s total external public debt.

Among international lenders, the World Bank provided $2.025 billion, the Asian Development Bank contributed $1.772 billion and the Islamic Development Bank disbursed $1.087 billion.

Saudi Arabia emerged as Pakistan’s largest bilateral financing partner during FY26, providing $1.013 billion, followed by China with $501 million.

Of the new financing commitments, $6.809 billion was allocated to federal projects and programmes, while $2.142 billion was earmarked for provincial initiatives.

The figures underline Pakistan’s continued reliance on foreign financing to manage its economic needs, maintain reserves and meet development requirements, while substantial debt repayments continue to place pressure on the country’s external financial position.