Pakistan spent roughly $16 billion servicing interest on foreign loans over four years, but most of that bill was met without taking fresh loans, State Bank of Pakistan Governor Jameel Ahmed said. Between $10 billion and $11 billion was paid using dollars purchased from the market.
Addressing a press conference on Monday after the monetary policy announcement, Ahmed put the country’s external debt at approximately $107 billion. The four-year interest bill amounted to an annual average of roughly $4 billion.
Market purchases helped fund payments and rebuild reserves
The SBP purchased more than $30 billion from the market during the period, according to the governor. Those purchases helped cover interest obligations while also supporting a recovery in foreign exchange reserves.
Reserves now stand at around $21.5 billion, compared with approximately $3 billion in early 2023. At that earlier level, they were sufficient to cover just two weeks of imports.
External debt growth slows
Ahmed said external debt increased by about $5 billion to $6 billion across the past four years, equivalent to roughly $1 billion to $1.25 billion annually. That compares with an annual increase of approximately $6.5 billion between 2015 and 2022.
The debt total had already exceeded $100 billion in 2022. The governor also said that, without borrowing, the total would have reached around $116 billion today because of the interest payments.
Lower interest payments expected next year
Ahmed described an improvement in the composition of Pakistan’s external debt. Multilateral and bilateral lenders, including the World Bank and Asian Development Bank, now account for about 80 percent of the total, against 55 percent in early 2023.
He outlined the following expectations and reserve targets:
- Annual foreign-loan interest payments below $3 billion next year.
- Foreign exchange reserves of $23 billion by December.
- A further rise in reserves to $25 billion by June 2027.
The governor’s remarks followed the SBP’s decision to increase its policy rate by 50 basis points, taking it to 12 percent.
