Pakistan’s External Debt Doubles to $135 Billion in Decade
World Bank report highlights surging debt levels and China’s role as primary creditor.
1Decade of Debt Growth
Pakistan’s total external debt escalated from $68.7 billion in 2015 to $135.1 billion by 2025. This near-doubling reflects a decade of sustained borrowing to meet fiscal requirements. The World Bank’s International Debt Report 2026 categorizes this figure into public, publicly guaranteed, private non-guaranteed, and short-term debt obligations for the nation.
2Primary Creditor Landscape
China remains Pakistan’s largest individual creditor, holding $22.4 billion in outstanding debt. Multilateral institutions follow, with the World Bank and Asian Development Bank holding $19.2 billion and $16.8 billion respectively. These official creditors typically offer longer maturity periods of 16 years compared to the shorter terms provided by private lenders.
3Disparate Lending Terms
Official loans carry an average interest rate of 3.6 percent with a four-year grace period. Conversely, private credit is significantly more expensive, averaging 8.6 percent interest with a much shorter three-year repayment window. This disparity highlights the increasing financial pressure on the country as it relies on diverse funding sources.
4Regional Economic Indicators
The Menap region, including Pakistan, experienced a rise in the external debt-to-GNI ratio from 26.7 percent to 29.4 percent in 2025. This represents the largest single-year increase among all regions globally. Despite improvements in debt-service ratios, the accumulation of debt relative to national income signals ongoing long-term fiscal challenges for Pakistan.
5Global Debt Surge
External debt for low- and middle-income countries reached a record $9.4 trillion in 2025, marking a 5.5 percent increase. This surge was driven by a rebound in bond issues and a weaker US dollar. Developing economies saw their debt levels rise sharply as private creditors returned to these emerging financial markets.
6Currency Valuation Impact
The depreciation of the US dollar accounted for 28.2 percent of the increase in external public debt for developing nations. In several cases, currency valuation gains effectively neutralized principal payments made during the year. This phenomenon left reported balances higher at the end of 2025 despite active debt servicing efforts throughout.
7Private Creditor Rebound
Debt owed to private creditors grew by 5.2 percent to $5 trillion in 2025, accelerating from the previous year’s 0.6 percent growth. This shift was fueled by increased borrowing from bondholders and commercial banks. While this provided necessary liquidity, it also hardened lending terms, particularly for countries eligible for concessional financing windows.
8Shifting Financial Flows
Total debt service payments rose for the fifth consecutive year to $1.4 trillion. However, 2025 marked a reversal in net transfers, shifting from a $118.4 billion outflow in 2024 to a $45.4 billion net inflow. This transition suggests a stabilization in capital availability, though debt burdens remain a critical pressure point.
Original article: Dawn — Pakistan’s External Debt Doubles to $135 Billion in Decade