ISLAMABAD: Pakistan’s external debt nearly doubled over the past decade, reaching $135.1 billion by the end of 2025, compared with $68.67 billion in 2015, according to the World Bank’s International Debt Report 2026.
Thank you for reading this post, don't forget to subscribe!The report showed that the country’s total external debt stood at $135.107 billion, comprising $107.076 billion in public and publicly guaranteed debt, $17.58 billion in private non-guaranteed debt and $10.45 billion in short-term debt.
Of the public and publicly guaranteed debt, $56.83 billion was owed to multilateral creditors, $42.43 billion to bilateral creditors and $7.8 billion to private creditors.
China remained Pakistan’s largest individual creditor, with outstanding loans of $22.4 billion, followed by the World Bank with $19.2 billion and the Asian Development Bank (ADB) with $16.83 billion.
The report noted that loans from official creditors carried an average maturity of 16 years, a four-year grace period and an average interest rate of 3.6 per cent. In contrast, private credit had an average interest rate of 8.6 per cent, a repayment period of three years and a one-year grace period.
During 2025, China extended the maturities of $2 billion in loans to Pakistan, while the International Monetary Fund (IMF) disbursed $2.3 billion under its Extended Fund Facility (EFF) and Resilience and Sustainability Facility (RSF) arrangements to support the country’s economic stability.
At the regional level, the Middle East, North Africa, Afghanistan and Pakistan (MENAP) recorded improvements in debt-servicing and interest ratios. However, the region’s external debt-to-gross national income (GNI) ratio increased from 26.7 per cent to 29.4 per cent in 2025, marking the largest annual increase among regions.
Globally, external debt among low- and middle-income countries (LMICs) rose by 5.5 per cent to a record $9.4 trillion in 2025, marking the sharpest increase in four years. The rise was driven by renewed bond issuance, a weaker US dollar and the return of private creditors to developing-country markets.
Debt accumulation was particularly pronounced among countries eligible for International Development Association (IDA) financing, where external debt increased by 8.1 per cent to $1.3 trillion. Low-income countries recorded an 8.9 per cent increase, taking their external debt to $262.4 billion.
The report identified the depreciation of the US dollar as a major factor behind the increase, accounting for 28.2 per cent of the rise in LMICs’ external public and publicly guaranteed debt.
Private lending also rebounded strongly, with LMIC debt owed to private creditors increasing by 5.2 per cent to $5 trillion in 2025. Debt owed to bondholders rose by 5.7 per cent to $2.4 trillion, while borrowing from commercial banks and other private creditors increased by 4.7 per cent to $2.7 trillion.
However, the return of private financing came with higher borrowing costs, particularly for poorer economies. IDA-eligible countries faced an average interest rate of 8.2 per cent on new commitments, the highest level since the late 1980s. The interest-rate gap between private and official creditors for these countries widened from 3.4 percentage points in 2016 to 5.5 percentage points in 2025.
Meanwhile, total debt-servicing payments by LMICs, including principal and interest, increased for the fifth consecutive year, rising 1.9 per cent to $1.4 trillion in 2025. Payments to bondholders alone surged 13.7 per cent to $363.1 billion.
The report noted that between 2022 and 2025, LMICs paid approximately $436.1 billion more in debt servicing than they received in new financing. However, the trend reversed in 2025, when long-term debt flows shifted from a net outflow of $118.4 billion in 2024 to a net inflow of $45.4 billion.
Despite improved access to international financing and stronger economic growth across developing economies, the World Bank highlighted the growing burden of debt servicing and the high cost of private borrowing, particularly for countries with limited financial resources.
Story by Khaleeq Kiani
