Pakistan Foreign Debt Interest Hits $3.24bn in FY26

Pakistan foreign debt interest cost the country $3.24 billion in the 2025-26 fiscal year, as total external public debt rose to $98.08 billion, the Ministry of Economic Affairs said in its annual report on foreign economic assistance.

The government retired $14.44 billion in external loans during the year, against $16.16 billion it received in fresh inflows. Debt servicing for the year came to $14.44 billion in all, made up of $11.2 billion in principal repayments and $3.24 billion in interest payments.

The report, released on Wednesday, put total external public debt at $98.08 billion on June 30, 2026. Net transfers stood at $4.42 billion, which means the debt stock grew during the year. The total rose by about $6.28 billion, or 6.84 per cent, from $91.8 billion at the close of the previous fiscal year.

Pakistan foreign debt interest rises on a larger debt stock

The interest bill grew with the debt itself. In 2024-25, the government paid $13.32 billion on debt servicing of external public loans, against $14.44 billion in 2025-26. The higher payment reflects a larger stock of loans and the cost of carrying them.

Pakistan also fell short of its borrowing target for the year. The budget had set a target of $19.92 billion in foreign inflows, but disbursements reached $16.16 billion, or 81 per cent of the target. The shortfall was about 19 per cent.

Most of the money that did arrive went to budget support. An amount of $9.38 billion was obtained for budgetary support and balance of payments, to address fiscal gaps, shore up foreign exchange reserves and steady the exchange rate. Project financing brought in $3.44 billion, programme financing $1.33 billion and commodity financing $2.02 billion.

Where the money came from

Naya Pakistan Certificates supplied the largest share of budget support money, at 33 per cent, or $3.05 billion. Time deposits from friendly countries followed closely at 32 per cent, or $3 billion. Foreign commercial banks and bonds together gave 31 per cent, while the International Monetary Fund accounted for 4 per cent.

Project financing stayed focused on energy and power, environment, climate and resilience, water, transport and communication, education and other social and economic sectors. The ministry said continued work with multilateral and bilateral partners also supported climate change mitigation and adaptation, resilience building, rehabilitation and reconstruction, and disaster risk reduction.

Of the total external public debt of $98.08 billion, $59.93 billion came from multilateral and bilateral development partners. The World Bank, the Asian Development Bank and the Islamic Development Bank were the largest contributors among multilateral partners. They gave $2.03 billion, $1.77 billion and $1.09 billion respectively, or 40 per cent, 35 per cent and 22 per cent of total multilateral disbursement.

On the bilateral side, Saudi Arabia was the largest contributor during the year, disbursing $1.01 billion, followed by China with $501 million.

Fresh commitments of $8.95bn agreed

Pakistan secured fresh commitments of $8.95 billion in 2025-26. Of this, $3.81 billion, or 42 per cent, was committed for budgetary support and balance of payments. Project financing took $2.77 billion, or 31 per cent, while programme financing stood at $1.41 billion, or 16 per cent, through contributions from the Asian Development Bank and the World Bank. Commodity financing of $967 million, or 11 per cent, came from the International Islamic Trade Finance Corporation.

Of the new commitments, $6.81 billion was for federal projects and programmes and $2.14 billion for provincial projects and programmes.

Why the figures matter for the budget

The interest bill is now one of the largest single claims on the federal budget. Every dollar paid in interest is a dollar that cannot go to development spending, subsidies or debt reduction.

The picture is not one-sided. The Asian Development Bank approved a $500 million loan for Pakistan this week to strengthen disaster preparedness, and the World Bank has a $17 billion loan programme for the country. Pakistan’s public debt maturity has also lengthened to 3.8 years, which gives the government more room to manage repayments.

At the same time, the fiscal strain is visible elsewhere. The centre has deducted Rs35 billion from provincial grant receipts for the first time, underlining how tight public finances have become.

What happens next

The ministry’s report gives the fullest picture yet of how Pakistan financed itself in 2025-26. The test in the current year will be whether inflows hold up and whether the interest bill can be kept in check as old loans fall due. The government will also need to show that new borrowing goes to projects that raise growth, rather than simply rolling over past debt.

Frequently asked questions

How much interest did Pakistan pay on foreign debt in FY26?

Pakistan paid $3.24 billion in interest on external public debt in 2025-26, as part of total debt servicing of $14.44 billion. Principal repayments made up the other $11.2 billion.

What is Pakistan’s total external public debt now?

Total external public debt stood at $98.08 billion on June 30, 2026, up by $6.28 billion, or 6.84 per cent, from $91.8 billion a year earlier.

How much foreign money did Pakistan receive in FY26?

Pakistan received $16.16 billion in disbursements, against a budget target of $19.92 billion. That was 81 per cent of the target, a shortfall of about 19 per cent.

Which lenders gave Pakistan the most money?

Among multilateral partners, the World Bank gave $2.03 billion, the Asian Development Bank $1.77 billion and the Islamic Development Bank $1.09 billion. Among bilateral partners, Saudi Arabia gave $1.01 billion and China $501 million.

What were the new loan commitments for?

Pakistan secured fresh commitments of $8.95 billion. Of this, 42 per cent was for budget support, 31 per cent for project financing, 16 per cent for programme financing and 11 per cent for commodity financing.