Pakistan’s External Debt: Pakistan owes over $23 billion in external debt that it needs to repay during the financial year 2025–26. For context, Pakistan’s financial year runs from July 1 to June 30, unlike India’s April to March cycle.
That $23 billion isn’t just a theoretical figure on paper. It’s a mix of hard debt from international institutions, temporary deposits from allies, and commercial borrowings. And here’s the thing. Paying it back won’t be easy.
The total debt picture
As of March 2025, Pakistan’s total public debt stood at 76,010 billion Pakistani Rupees (PKR), which is roughly $267 billion at current exchange rates. That’s split between domestic and external debt.
Here’s how it breaks down:
| Debt Type | PKR (in billion) | USD Equivalent (approx.) |
|---|---|---|
| Domestic Debt | 51,520 | $180 billion |
| External Debt | 24,490 | $87.4 billion |
| Total | 76,010 | $267.4 billion |
So what’s in this $23 billion due in 2025–26
That’s the debt Pakistan needs to either repay or roll over in the next 12 months. And it’s made up of two main parts.
Twelve billion dollars in temporary deposits from friendly countries
These are not loans in the traditional sense. They’re more like financial cushions. Short-term deposits held by Pakistan’s central bank, given by a handful of allied countries. The hope is they won’t ask for the money back immediately.
Here’s where that $12 billion comes from:
| Country | Amount (USD) |
|---|---|
| Saudi Arabia | $5 billion |
| China | $4 billion |
| UAE | $2 billion |
| Qatar | $1 billion |
| Total | $12 billion |
Pakistan is betting that these countries will extend the deadlines or quietly roll over the deposits. But that’s a political gamble, not a guaranteed deal.
Eleven billion dollars in real external debt
This chunk is owed to actual creditors who expect payment on time. Multilateral agencies, bilateral lenders, bondholders, and commercial banks. It includes:
- International Monetary Fund
- World Bank
- Asian Development Bank
- Eurobond holders
- Chinese banks
- Gulf lenders
And these aren’t institutions that like surprises.
Debt servicing eats up almost half the budget
Pakistan’s federal budget for 2025–26 is PKR 17,573 billion. Out of that, PKR 8,200 billion is just for debt repayments, both domestic and external.
That means 46.7 percent of the entire federal budget is going to past borrowings. Not development. Not healthcare. Not education. Just repaying what’s already been spent.
| Budget Component | PKR (in billion) | % of Total Budget |
|---|---|---|
| Debt Servicing | 8,200 | 46.7 |
| Remaining Budget | 9,373 | 53.3 |
| Total Budget | 17,573 | 100 |
What this really means
When nearly half your national budget is locked into paying off old loans, your ability to invest in future growth shrinks dramatically. Every rupee spent on interest is a rupee not spent on jobs, energy, or infrastructure.
Even worse, when a large chunk of your external debt is short-term or politically influenced, you’re constantly on edge. One ally refusing to roll over deposits, or one downgrade in your credit rating, could trigger a financial chain reaction.
Will Pakistan survive this
It might. But it’s running on borrowed time, borrowed money, and borrowed goodwill. That’s not a strategy. That’s a gamble.
If the IMF and other lenders step in again with another bailout, Pakistan might get breathing room. But bailouts come with strings, and the country’s patience and political stability are already stretched.
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