Pakistan Pays $16 Billion Interest on Loans

Pakistan has disbursed approximately $16 billion in interest payments on its foreign loans over the last four years, averaging around $4 billion annually, according to State Bank of Pakistan (SBP) Governor Jameel Ahmed. Addressing his post-monetary policy press conference, the governor disclosed that the nation's total external debt currently amounts to around $107 billion, having surpassed the $100 billion mark in 2022.

He explained that without any borrowing, Pakistan's external debt would be approximately $116 billion today due to the interest accrued. Out of this interest, about $10 to 11 billion was paid using dollars procured by the SBP from the market, rather than through new loans. The central bank has acquired over $30 billion from the market during this period, which has also contributed to increasing reserves from approximately $3 billion in early 2023, when they only covered two weeks of imports, to around $21.5 billion currently.

Governor Ahmed noted that external debt increased by just $5 to 6 billion in the past four years, or roughly $1 to 1.25 billion per year, compared to an annual rise of around $6.5 billion between 2015 and 2022. The quality of Pakistan's debt has also improved, with about 80 percent now coming from multilateral and bilateral lenders like the World Bank and the Asian Development Bank, up from 55 percent in early 2023.

The governor anticipates annual interest payments to drop below $3 billion next year. He also stated that the State Bank of Pakistan aims to raise forex reserves to $23 billion by December and $25 billion by June 2027. The comments followed the SBP's decision to raise the policy rate by 50 basis points to 12 percent. Pakistan's foreign debt interest bill was previously reported to have surged sharply earlier this year.