Pakistan's External Debt Nearly Doubles to $135bn in a Decade, World Bank Says

Photo: Dawn

Pakistan owes the world nearly twice as much as it did ten years ago. The World Bank says the country's external debt climbed from $68.7 billion in 2015 to $135.1 billion by the end of 2025, and China is now its single biggest creditor.

The figures come from the World Bank's International Debt Report 2026, published in Dawn today. The rise was steady rather than sudden, but the scale of it is hard to ignore. In a decade, the debt pile grew by $66.4 billion.

Most of it is money the state itself owes or has guaranteed. Public and publicly guaranteed debt stood at $107.1 billion, with private non-guaranteed debt at $17.6 billion and short-term debt at $10.5 billion. Of the public debt, $56.8 billion is owed to multilateral lenders, $42.4 billion to other governments and $7.8 billion to private creditors.

China sits at the top of the creditor list with $22.4 billion outstanding, ahead of the World Bank itself at $19.2 billion and the Asian Development Bank at $16.8 billion. The report also notes that China extended the maturities on $2 billion of loans to Pakistan during 2025, while the International Monetary Fund provided $2.3 billion in fresh disbursements under its Extended Fund Facility and Resilience and Sustainability Facility.

The terms matter as much as the total. Loans from official creditors carry an average maturity of 16 years, a four-year grace period and average interest of 3.6 per cent. Private credit is far harsher, at 8.6 per cent on average, with only three years to repay and one year of grace. That gap is why the government keeps trying to borrow from official lenders rather than the market.

What does it mean for ordinary Pakistanis? Debt has to be serviced before anything else. Every dollar sent abroad in interest and repayments is a dollar that cannot go to schools, hospitals, roads or power. Spread across the population, the $135.1 billion works out at more than $500 for every person in the country, including children.

There is another side to the picture. The same week brought better news on reserves. The State Bank reported that Pakistan's total foreign exchange reserves reached a record $26.9 billion, with the central bank itself holding $21.6 billion, the highest in its history. That cushion is what keeps the rupee steady and fuel and medicine imports flowing, just as petrol fell by Rs9.41 a litre this week. Investors seem to agree. The stock market passed 175,000 points this week, and gold crossed $4,100 an ounce as the dollar weakened.

Finance Minister Muhammad Aurangzeb has told parliament the government aims to cut external debt by $4 billion this fiscal year, and by $3.5 billion the year after. Public debt has already fallen to 68.6 per cent of GDP, down from 75.1 per cent in 2022-23, and the government points to a $3 billion rollover from Saudi Arabia as proof that lenders still trust it. It is also trying to grow its way out of trouble, scrapping the 80 per cent export rule for small exporters' loans, while the ECC cleared Rs380 billion in grants for dams, defence and fertiliser gas.

The wider world is borrowing heavily too. The World Bank says external debt across low and middle-income countries rose 5.5 per cent in 2025 to a record $9.4 trillion, the sharpest increase in four years, as bond markets reopened and the dollar weakened. But the report warns that the poorest countries are paying some of their highest borrowing costs in decades.

For Pakistan, the numbers tell two stories at once. The debt built up over a decade will take years to work down, yet the reserves cushion and the falling debt ratio suggest the worst of the crisis years may be behind it.

Sources

• Dawn: Country's external debt nearly doubles in a decade
• Business Recorder: Pakistan's external debt doubles over a decade: World Bank
• Dawn: Pakistan builds record reserves amid Gulf war

The next test comes in December, when the IMF board meets to approve a $1.2 billion payout to Pakistan.

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