Pakistan Concessional Lending Rate Clarified by Finance Ministry
The Ministry of Finance has clarified the concessional lending rate on Pakistan’s external loans. It rejected claims that the country pays up to 8 percent interest. Instead, the government said the average interest on public external debt is close to 4 percent.
Pakistan’s total external debt and liabilities currently stand at 138 billion dollars. However, this figure includes private sector obligations and banking liabilities. Therefore, it should not be confused with public external debt.
Difference Between Total and Public Debt
Public external debt is around 92 billion dollars. This amount covers government and government guaranteed loans. It also includes debts taken by public sector institutions. In addition, about 75 percent of this borrowing comes from multilateral lenders and bilateral development partners. These funds are concessional and long term in nature. As a result, they carry lower interest rates. Meanwhile, nearly 7 percent of loans are commercial borrowings. Another 7 percent consists of long-term Eurobonds.
Why Interest Payments Increased
Interest payments on public external debt have increased in recent years. For example, payments rose from 1.99 billion dollars in FY2022. They reached 3.59 billion dollars by FY2025. This marks an 80.4 percent rise over three years. However, the increase is not due to excessive borrowing alone. Global interest rate hikes also played a major role.
Role of Global Financial Conditions
After rising inflation worldwide, the Federal Reserve raised policy rates sharply. Rates moved from 0.75–1.00 percent in May 2022. They climbed to 5.25–5.50 percent by July 2023. Consequently, borrowing costs increased across global markets. Pakistan also felt the impact on its external interest payments.
During FY2022-23, the country faced severe balance of payments pressure. Foreign exchange reserves dropped below one month of import cover. Therefore, the government secured support through the International Monetary Fund Extended Fund Facility. These steps helped stabilize reserves and improve external accounts.
Government’s Commitment to Stability
The Ministry stressed the importance of responsible debt management. It also highlighted the need for transparency in financial reporting. Officials urged stakeholders to view debt figures in the right context. In addition, they asked analysts to consider global financial trends when discussing Pakistan’s liabilities.
