Finance ministry phrases claims of 8% curiosity on exterior loans ‘deceptive’

The Ministry of Finance on Sunday categorically rejected claims relating to the nation’s exterior debt and related curiosity funds, calling the studies deceptive and stating that the nation’s exterior debt profile stays predominantly concessional and long-term.

“Pakistan’s whole exterior debt and liabilities at the moment stand at $138 billion, whereas public exterior debt curiosity outflows elevated from $1.99 billion in FY2022 to $3.59 billion in FY2025, representing a rise of 80.4 per cent, not 84 per cent as reported,” the ministry mentioned in an official assertion.

The ministry said that the general common price of exterior public debt is roughly 4 per cent, reflecting the predominantly concessional nature of the borrowing portfolio. “In absolute phrases, curiosity funds rose by $1.60 billion over this era, not $1.67 billion,” it added.

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The clarification got here after assertions in a latest press commentary, claiming that curiosity funds on exterior debt elevated by 84% in three years. In comparison with 2022, curiosity funds final yr rose by $1.67 billion. This curiosity was paid to the IMF, World Financial institution, Asian Growth Financial institution (ADB), and business banks.

Pakistan is paying curiosity on exterior loans at charges of as much as 8%. Officers mentioned that Saudi Arabia and China additionally acquired curiosity on protected deposits. Together with curiosity, Pakistan spent $13.32 billion yearly on debt servicing. Internet exterior debt elevated by $1.71 billion final yr.

The ministry in an announcement launched at this time mentioned that, “The figures offered within the commentary require contextual rationalization to make sure an correct and complete understanding of Pakistan’s exterior debt profile.”

It mentioned the whole exterior debt determine features a broad vary of obligations, comparable to public and publicly assured debt, debt of public sector enterprises (each assured and non-guaranteed), financial institution borrowings, private-sector exterior debt, and intercompany liabilities to direct traders.

It burdened that this combination shouldn’t be confused with Exterior Public (Authorities) Debt, which quantities to roughly $92 billion.

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Of the whole exterior public debt, practically 75 per cent consists of concessional and long-term financing from multilateral establishments (excluding the IMF) and bilateral growth companions.

“Solely about 7 per cent of this debt consists of economic loans, whereas one other 7 per cent pertains to long-term Eurobonds. In mild of this composition, due to this fact the declare that Pakistan is paying curiosity on exterior loans ‘as much as 8 per cent’ is deceptive,” the ministry mentioned.

The assertion additionally supplied a breakdown of debt servicing to particular collectors. Based on the State Financial institution of Pakistan:

• IMF acquired $1.50 billion, together with $580 million in curiosity;

• Naya Pakistan Certificates funds totalled $1.56 billion, together with $94 million in curiosity;

• Asian Growth Financial institution acquired $1.54 billion, together with $615 million in curiosity;

• World Financial institution acquired $1.25 billion, together with $419 million in curiosity;

• Exterior business loans amounted to just about $3 billion, with $327 million representing curiosity funds.

The ministry added that whereas curiosity funds have elevated in absolute phrases, this rise can’t be attributed solely to an enlargement within the debt inventory.

“Though the general debt inventory has elevated barely since FY2022, the extra inflows have primarily originated from concessional multilateral sources and the IMF’s Prolonged Fund Facility (EFF) beneath the continuing IMF-supported programme,” it said.