Borrow, Repay, Borrow Again: Pakistan’s Foreign Debt Doubles in 10 Years

CHINA IS PAKISTAN’S BIGGEST INDIVIDUAL CREDITOR

The creditor breakdown shows that Pakistan owed $56.83 billion to multilateral institutions and $42.44 billion to bilateral creditors in 2025.

Within multilateral lending, the World Bank-IDA accounted for $19.21 billion, while the Asian Development Bank accounted for $16.83 billion. Other multilateral creditors accounted for $20.79 billion.

Among bilateral lenders, China accounted for $22.42 billion, making it the largest individual country creditor. Pakistan owed another $11.85 billion to other bilateral creditors, while lending involving multiple lenders accounted for $8.17 billion.

The figures underline China’s significant position in Pakistan’s external financing. However, the broader creditor mix also shows the importance of multilateral institutions in meeting the country’s borrowing requirements.

PRIVATE LOANS COST PAKISTAN MORE

Another concern highlighted by the debt report is the difference in borrowing costs between official and private creditors.

The average interest rate on new commitments from official creditors was 3.6% in 2025, compared with 8.6% for private creditors. The repayment terms were also significantly different.

New loans from official creditors had an average maturity of 16 years and a grace period of four years. In comparison, private creditors offered an average maturity of just three years and a grace period of one year.

This means Pakistan’s borrowing from private creditors comes with higher interest costs and shorter repayment timelines, increasing the pressure to arrange funds for repayments.

HOW MUCH OF PAKISTAN’S DEBT IS PUBLIC?

The composition of Pakistan’s external debt also shows that the government and publicly backed borrowers account for the largest share.

Public and publicly guaranteed debt stood at $107.07 billion in 2025, accounting for nearly 79% of total external debt. Private non-guaranteed debt was $17.58 billion, while short-term obligations stood at $10.45 billion.

The distinction matters because public and publicly guaranteed borrowing creates repayment obligations for the government or entities whose debt carries a public guarantee.

CHINA, IMF SUPPORT PROVIDE SOME RELIEF

Pakistan has also received some breathing room from its overseas lenders.

The World Bank report notes that China extended the maturity of around $2 billion in loans due for repayment in 2025. Such extensions give Pakistan additional time to meet its repayment obligations.

The International Monetary Fund (IMF) also disbursed $2.3 billion to Pakistan in 2025 under its Extended Fund Facility and Resilience and Sustainability Facility arrangements.

The support comes as Pakistan continues to manage its external financing requirements and work towards economic stability.

The broader picture is that Pakistan’s external debt has almost doubled in a decade, with China remaining its largest individual creditor. While multilateral institutions account for a larger combined share of public external debt, the higher cost and shorter maturity of private borrowing remain important pressure points for the country’s finances.