Pakistan Pays $16 Billion Loan Interest

Pakistan has paid approximately $16 billion in interest on foreign loans over the past four years, averaging around $4 billion annually, according to State Bank of Pakistan (SBP) Governor Jameel Ahmed.

Speaking at a press conference following the monetary policy announcement, the governor said Pakistan’s total external debt currently stands at approximately $107 billion, compared with more than $100 billion in 2022.

He explained that the country’s external debt increased by only $5 billion to $6 billion during the past four years, equivalent to an annual increase of around $1 billion to $1.25 billion. In contrast, foreign debt grew by an average of $6.5 billion annually between 2015 and 2022.

According to the governor, around $10 billion to $11 billion of the interest payments were covered through dollars purchased by the central bank from the foreign exchange market rather than through fresh borrowing. The SBP purchased more than $30 billion from the market during this period.

These purchases also helped increase Pakistan’s foreign exchange reserves from approximately $3 billion in early 2023 to around $21.5 billion.

The governor said the composition of external debt had improved, with nearly 80 percent now owed to multilateral and bilateral lenders, including the World Bank and the Asian Development Bank. This proportion was around 55 percent in early 2023.

He expressed hope that Pakistan’s annual interest payments on foreign loans would fall below $3 billion next year.

The SBP has also set targets to increase foreign exchange reserves to $23 billion by December 2026 and $25 billion by June 2027.

The announcement came after the central bank raised its policy interest rate by 0.5 percentage points to 12 percent. .. Source