Pakistan has paid around $16 billion in interest on its foreign loans over the past four years, an average of about $4 billion a year, State Bank of Pakistan (SBP) Governor Jameel Ahmed has said.
Speaking at his post-monetary policy press conference on Monday, the governor said the country’s total external debt now stands at around $107 billion. It was already above $100 billion in 2022.
He said that if Pakistan had not borrowed at all, its external debt would have been around $116 billion today because of the interest it paid.
Interest Paid Without New Loans
About $10 to 11 billion of this interest was paid with dollars the SBP bought from the market, not with fresh loans.
The central bank has bought over $30 billion from the market in this period. This also helped lift reserves from about $3 billion in early 2023, when they covered only two weeks of imports, to around $21.5 billion now.
SBP Governor said external debt grew by only $5 to 6 billion in the last four years, or about $1 to 1.25 billion a year. Between 2015 and 2022, it rose by around $6.5 billion every year.
Interest Bill to Fall Below $3 Billion
The governor said the quality of Pakistan’s debt has also improved. About 80 percent of external debt now comes from multilateral and bilateral lenders, such as the World Bank and the Asian Development Bank, up from 55 percent in early 2023.
He expects annual interest payments to fall below $3 billion next year.
Governor said SBP aims to raise forex reserves to $23 billion by December and $25 billion by June 2027.
The remarks came after the SBP raised the policy rate by 50 basis points to 12 percent. Earlier this year, Pakistan’s foreign debt interest bill was reported to have jumped sharply.
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