KARACHI: Pakistan’s accumulated debt stock rose by 7.6 percent to $108.53 billion in 2020 from $100.83 billion a year before that, said a study conducted by the World Bank on Monday.
The global lending agency said its report, International Debt Statistics 2022, showed the debt vulnerabilities of low-income countries had significantly increased as a result of the COVID-19 pandemic.
Pakistan was among the top 10 countries that became eligible for debt relief under the Debt Services Suspension Initiatives announced by the G20 creditors after the emergence of the pandemic.
Data presented in a tabulated form in the report showed the overall rise in the country’s debt last year.
“Net inflows from other private creditors rose 15 percent in 2020 to $14 billion but were highly concentrated and also reflected rollovers and extension of new credits by commercial bank loans to Pakistan in the context of the IMF program,” the report added.
Pakistan’s debt stock was $63.09 billion in 2010 which rose to $93.5 billion by 2018, up by 48 percent while stock of debts rose by 16 percent between 2018 and 2020, according to the figures quoted in the World Bank report.
The external debt stock of low- and middle-income countries in 2020 rose, on average, by 5.6 percent to $8.7 trillion.
However, for many countries the increase was in double digits.
The external debt stock of countries eligible for the G-20 debt service initiative rose on average by 12 percent to $860 billion. In certain cases, the increase was even recorded at 20 percent or more.
For most countries, the rise in external indebtedness was not matched by the growth of gross national income (GNI) and exports, the report informed.
The external debt-to-GNI ratio of low- and middle-income countries’ rose to 42 percent in 2020 from 37 percent in 2019 while their debt-to-export ratio increased to 154 percent in 2020 from 126 percent in 2019.
Governments around the world responded to the COVID-19 pandemic with massive fiscal, monetary, and financial stimulus packages.
“While these measures were aimed at addressing the health emergency, cushioning the impact of the pandemic on the poor and vulnerable and putting countries on a path to recovery, the resulting debt burden of the world’s low-income countries rose 12 percent to a record $860 billion in 2020,” said a World Bank statement.
Even before the pandemic, many low- and middle-income countries were in a vulnerable position, undergoing a slowdown of economic growth and public and external debt at elevated levels.
Taken together, external debt stocks of low- and middle-income countries rose by 5.3 percent in 2020 to $8.7 trillion.
“We need a comprehensive approach to the debt problem, including debt reduction, swifter restructuring and improved transparency,” said David Malpass, the president of the World Bank Group in a statement, adding: “Sustainable debt levels are vital for economic recovery and poverty reduction.”
Overall, in 2020, net inflows from multilateral creditors to low- and middle-income countries rose to $117 billion, the highest level in a decade.
Net debt inflows of external public debt to low-income countries rose by 25 percent to $71 billion, also the highest level in a decade.
Multilateral creditors, including the International Monetary Fund, provided $42 billion in net inflows while bilateral creditors accounted for an additional $10 billion.
World Bank says Pakistan’s external debt stock rose to over $108 billion in 2020
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World Bank says Pakistan’s external debt stock rose to over $108 billion in 2020
- According to the bank’s International Debt Statistics 2022 report, Pakistan’s foreign debt has increased by 16 percent since 2018
- On average, the external debt stock of low- and middle-income countries rose by 5.6 percent to $8.7 trillion in 2020
IMF warns against policy slippage amid weak recovery as it clears $1.2 billion for Pakistan
- Pakistan rebuilt reserves, cut its deficit and slowed inflation sharply over the past one year
- Fund says climate shocks, energy debt, stalled reforms threaten stability despite recent gains
ISLAMABAD: Pakistan’s economic recovery remains fragile despite a year of painful stabilization measures that helped pull the country back from the brink of default, the International Monetary Fund (IMF) warned on Thursday, after it approved a fresh $1.2 billion disbursement under its ongoing loan program.
The approval covers the second review of Pakistan’s Extended Fund Facility (EFF) and the first review of its climate-focused Resilience and Sustainability Facility (RSF), bringing total disbursements since last year to about $3.3 billion.
Pakistan entered the IMF program in September 2024 after years of weak revenues, soaring fiscal deficits, import controls, currency depletion and repeated climate shocks left the economy close to external default. A smaller stopgap arrangement earlier that year helped avert immediate default, but the current 37-month program was designed to restore macroeconomic stability through strict monetary tightening, currency adjustments, subsidy rationalization and aggressive revenue measures.
The IMF’s new review shows that Pakistan has delivered significant gains since then. Growth recovered to 3 percent last year after shrinking the year before. Inflation fell from over 23 percent to low single digits before rising again after this year’s floods. The current account posted its first surplus in 14 years, helped by stronger remittances and a sharp reduction in imports. And the government delivered a primary budget surplus of 1.3 percent of GDP, a key program requirement. Foreign exchange reserves, which had dropped dangerously low in 2023, rose from US$9.4 billion to US$14.5 billion by June.
“Pakistan’s reform implementation under the EFF arrangement has helped preserve macroeconomic stability in the face of several recent shocks,” IMF Deputy Managing Director Nigel Clarke said in a statement after the Board meeting.
But he warned that Islamabad must “maintain prudent policies” and accelerate reforms needed for private-sector-led and sustainable growth.
The Fund noted that the 2025 monsoon floods, affecting nearly seven million people, damaging housing, livestock and key crops, and displacing more than four million, have set back the recovery. The IMF now expects GDP growth in FY26 to be slightly lower and forecasts inflation to rise to 8–10 percent in the coming months as food prices adjust.
The review warns Pakistan against relaxing monetary or fiscal discipline prematurely. It urges the State Bank to keep policy “appropriately tight,” allow exchange-rate flexibility and improve communication. Islamabad must also continue raising revenues, broadening the tax base and protecting social spending, the Fund said.
Despite the progress, Pakistan’s structural weaknesses remain severe.
Power-sector circular debt stands at about $5.7 billion, and gas-sector arrears have climbed to $11.3 billion despite tariff adjustments. Reform of state-owned enterprises has slowed, including delays in privatizing loss-making electricity distributors and Pakistan International Airlines. Key governance and anti-corruption reforms have also been pushed back.
The IMF welcomed Pakistan’s expansion of its flagship Benazir Income Support Program, which raises cash transfers for low-income families and expands coverage, saying social protection is essential as climate shocks intensify. But it warned that high public debt, about 72 percent of GDP, thin external buffers and climate exposure leave the country vulnerable if reform momentum weakens.
The Fund said Pakistan’s challenge now is to convert short-term stabilization into sustained recovery after years of economic volatility, with its ability to maintain discipline, rather than the size of external financing alone, determining the durability of its gains.
