ISLAMABAD: China has emerged as Pakistan’s largest creditor, with nearly $29 billion in loans, as the South Asian nation grapples with mounting debt pressures. According to the World Bank’s International Debt Report, Pakistan ranks among the top three recipients of International Monetary Fund (IMF) loans this year, highlighting its precarious fiscal position.
The report reveals Pakistan’s total external debt, including IMF loans, stood at $130.85 billion in 2023. This debt equates to 352% of the country’s total exports and 39% of its gross national income (GNI). Servicing this debt consumed 43% of exports and 5% of GNI, underscoring a fragile fiscal foundation.
Key Creditors and Debt Composition
China accounts for the largest share of Pakistan’s external debt at 22% ($28.8 billion), followed by the World Bank at 18% ($23.55 billion) and the Asian Development Bank (ADB) at 15% ($19.63 billion). Saudi Arabia is the second-largest bilateral lender, holding 7% of Pakistan’s total debt, approximately $9.16 billion.
Of the total external debt, bilateral lenders hold 45% ($58.88 billion), while multilaterals like the World Bank and ADB account for 46% ($60.2 billion). Private lenders, led by bondholders, hold the remaining 9%.
In 2023, Pakistan received $12.95 billion in disbursements but repaid $14 billion, including $4.33 billion in interest payments. Long-term external debt stocks accounted for $110.44 billion, while IMF credit and allocations totaled $11.53 billion. Short-term external debt amounted to $8.88 billion.
Rising Interest Costs and Fiscal Strain
Globally, developing nations faced a record $1.4 trillion in foreign debt servicing costs in 2023, driven by 20-year-high interest rates. Interest payments surged by nearly a third to $406 billion, squeezing budgets for critical sectors such as health, education, and environmental initiatives. For the poorest nations eligible for World Bank International Development Association (IDA) assistance, debt servicing reached a record $96.2 billion.
Pakistan’s situation is particularly dire. The country’s interest payments reached 43% of its export earnings in 2023, exceeding a troubling milestone. In South Asia, Pakistan made the second-largest interest payments after India and Bangladesh, as regional payments on public and publicly guaranteed (PPG) debt rose 62% to $12.5 billion.
Widespread Vulnerability
Low- and middle-income countries (LMICs) are facing a fiscal squeeze from elevated debt payments. Interest payments as a share of export earnings — a key measure of repayment capacity — rose by 1.6 percentage points in 2023 to 5.8%, the largest increase since 2005. Mozambique (38.3%), Senegal (25.9%), Pakistan (13.6%), Kenya (12.8%), and Dominica (10.3%) have among the highest ratios of interest payments to export earnings, signaling weakened fiscal resilience.
The report underscores the urgent need for sustainable debt management as nations like Pakistan face mounting challenges from elevated borrowing costs and shrinking fiscal space.
I am an experienced writer, analyst, and author. My exposure in English journalism spans more than 28 years. In the past, I have been working with daily The Muslim (Lahore Bureau), daily Business Recorder (Lahore/Islamabad Bureaus), Daily Times, Islamabad, daily The Nation (Lahore and Karachi). With daily The Nation, I have served as Resident Editor, Karachi. Since 2009, I have been working as a Freelance Writer/Editor for American organizations.
