KARACHI: Pakistan’s Finance Minister Muhammad Aurangzeb on Wednesday acknowledged Saudi Arabia’s critical role in helping secure the country’s International Monetary Fund (IMF) loan package and invited his counterpart from the Kingdom to visit Pakistan, during a series of high-level bilateral meetings held on the sidelines of the IMF-World Bank Spring Meetings in Washington, DC.
The IMF approved a $7 billion Extended Fund Facility (EFF) for Pakistan in September 2024 after Saudi Arabia, the United Arab Emirates and China provided essential financing assurances to unlock the package.
The deal was widely seen as vital to stabilizing Pakistan’s economy amid declining foreign reserves and mounting fiscal stress.
The Pakistani finance chief acknowledged the Kingdom’s role in a meeting with his Saudi counterpart, Mohammed Aljadaan, during his trip to the United States.
“Senator Aurangzeb thanked H.E. Aljadaan for Saudi Arabia’s longstanding and strong support to Pakistan in its pursuit of economic development, including through support for the IMF program, and invited him to visit Pakistan,” the finance ministry said in a statement circulated after the meeting.
Aurangzeb reaffirmed Pakistan’s commitment to economic reforms and welcomed Saudi investments. The meeting followed Aurangzeb’s engagement a day earlier with Sultan bin Abdulrahman Al-Murshid, the top Saudi Fund for Development (SFD) official, where he sought faster disbursements under the $1.2 billion Saudi Oil Facility, an arrangement that allows Pakistan to defer payments on oil imports.
He also requested SFD’s support for the National Highway N-25 and reviewed the pace of implementation of ongoing projects.
In addition to his meeting with the Saudi counterpart, the Pakistani finance chief held separate sessions with senior UAE and Chinese officials.
During a meeting with UAE Minister of State for Financial Affairs Mohamed Bin Hadi Al Hussaini, Aurangzeb discussed his country’s improving economic indicators, including a recent credit rating upgrade by Fitch, and briefed him on the government’s privatization program.
He informed the UAE side that a Staff-Level Agreement (SLA) had been reached with the IMF under the EFF and a new arrangement under the Resilience and Sustainability Facility.
The finance minister also expressed interest in the UAE’s regulatory experience in cryptocurrency and invited his counterpart to visit Pakistan.
In another bilateral engagement, Aurangzeb met with Chinese Finance Minister Lan Fo’an to discuss Beijing’s continued economic support.
He sought support from the People’s Bank of China to fast-track the issuance of Pakistan’s Panda Bond, a renminbi-denominated bond issued in China’s capital markets.
Pakistan’s finance chief acknowledges Saudi role in IMF deal, invites counterpart to visit
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Pakistan’s finance chief acknowledges Saudi role in IMF deal, invites counterpart to visit
- Saudi Arabia, UAE and China provided financing assurances needed to unlock the $7 billion IMF loan
- Aurangzeb also discusses Panda bonds, cryptocurrency regulation with Chinese and UAE ministers
Islamabad dismisses claims about paying up to 8 percent interest on foreign loans as ‘misleading’
- Pakistan has long relied on external loans to help bridge persistent gaps in public finances and foreign exchange reserves
- Pakistan’s total external debt, liabilities stand at $138 billion at an overall average cost of around 4 percent, ministry says
KARACHI: Pakistan’s finance ministry on Sunday dismissed as “misleading” claims that the country is paying up to 8 percent interest on external loans, saying the overall average cost of external public debt is approximately 4 percent.
Pakistan has long relied on external loans to help bridge persistent gaps in public finances and foreign exchange reserves, driven largely by a narrow tax base, chronic trade deficits, rising debt-servicing costs and repeated balance-of-payments pressures.
Over the decades, successive governments have turned to multilateral and bilateral lenders, including the International Monetary Fund, the World Bank and the Asian Development Bank, to support budgetary needs and shore up foreign exchange reserves.
The finance ministry on Sunday issued a clarification in response to a “recent press commentary” regarding the country’s external debt position and associated interest payments, and said the figures required contextual explanation to ensure accurate understanding of Pakistan’s external debt profile.
“Pakistan’s total external debt and liabilities currently stand at $138 billion. This figure, however, encompasses a broad range of obligations, including public and publicly guaranteed debt, debt of Public Sector Enterprises (both guaranteed and non-guaranteed), bank borrowings, private-sector external debt, and intercompany liabilities to direct investors. It is therefore important to distinguish this aggregate figure from External Public (Government) Debt, which amounts to approximately $92 billion,” it said.
“Of the total External Public Debt, nearly 75 percent comprises concessional and long-term financing obtained from multilateral institutions (excluding the IMF) and bilateral development partners. Only about 7 percent of this debt consists of commercial loans, while another 7 percent relates to long-term Eurobonds. In light of this composition, the claim that Pakistan is paying interest on external loans ‘up to 8 percent’ is misleading.
The overall average cost of External Public Debt is approximately 4 percent, reflecting the predominantly concessional nature of the borrowing portfolio.”
With respect to interest payments, public external debt interest outflows increased from $1.99 billion in Fiscal Year (FY) 2022 to $3.59 billion in FY2025, representing an increase of 80.4 percent, not 84 percent as reported. In absolute terms, interest payments rose by $1.60 billion over this period, not $1.67 billion, it said.
According to the State Bank of Pakistan’s records, Pakistan’s total debt servicing payments to specific creditors during the period under reference were as follows: the IMF received $1.50 billion, of which $580 million constituted interest; Naya Pakistan Certificates payments totaled $1.56 billion, including $94 million in interest; the Asian Development Bank received $1.54 billion, including $615 million in interest; the World Bank received $1.25 billion, including $419 million in interest; and external commercial loans amounted to nearly $3 billion, of which $327 million represented interest payments.
“While interest payments have increased in absolute terms, this rise cannot be attributed solely to an expansion in the debt stock,” the ministry said. “Although the overall debt stock has increased slightly since FY2022, the additional inflows have primarily originated from concessional multilateral sources and the IMF’s Extended Fund Facility (EFF) under the ongoing IMF-supported program.”
Pakistan secured a $7 billion IMF bailout in Sept. 2024 as part of Prime Minister Shehbaz Sharif’s efforts to stabilize the South Asian economy that narrowly averted a default in 2023. The government has since been making efforts to boost trade and bring in foreign investment to consolidate recovery.
“It is also important to note that the increase in interest payments reflects prevailing global interest rate dynamics. In response to the inflation surge of 2021–22, the US Federal Reserve raised the federal funds rate from 0.75-1.00 percent in May 2022 to 5.25–5.50 percent by July 2023. Although rates have since moderated to around 3.75 percent, they remain significantly higher than 2022 levels,” the finance ministry said.
“The government remains committed to prudent debt management, transparency, and the continued strengthening of Pakistan’s macroeconomic stability,” it added.
