China now holds the largest share of Pakistan’s external debt, amounting to approximately $28.79 billion, or 22% of the total, according to the World Bank’s latest International Debt Report. Pakistan, a nation of 240 million people, also ranks among the top three loan recipients from the International Monetary Fund (IMF) in 2023.
The report, released Tuesday, highlights Pakistan’s challenging fiscal situation, with its external debt amounting to $130.85 billion in 2023. This represents 352% of the country’s total exports and 39% of its gross national income (GNI). Debt servicing accounted for 43% of total exports and 5% of GNI, underscoring significant financial strain.
China tops Pakistan’s creditors, followed by the World Bank (18%, $23.55 billion) and the Asian Development Bank (15%, $19.63 billion). Saudi Arabia is the second-largest bilateral lender, holding 7% of Pakistan’s debt, valued at $9.16 billion.
Of the total debt, 45% ($58.88 billion) comes from bilateral lenders, 46% ($60.2 billion) from multilateral institutions, and the remaining 9% from private lenders, primarily bondholders. Long-term external debt stood at $110.44 billion, IMF credits and allocations at $11.53 billion, and short-term debt at $8.88 billion in 2023.
Developing nations, including Pakistan, are grappling with rising debt servicing costs, which reached a record $1.4 trillion globally in 2023 due to a 20-year high in interest rates. Pakistan paid $14 billion in repayments, including $4.33 billion in interest, while total disbursements were $12.95 billion.
South Asia experienced the steepest increase in interest payments, rising 62% to $12.5 billion in 2023, with Pakistan making the region’s second-largest payments. The report reveals that interest payments now account for 43% of Pakistan’s export earnings, highlighting its weakened fiscal position.
Globally, low- and middle-income countries (LMICs) face similar fiscal challenges. Interest payments for LMICs surged to 5.8% of export earnings, the highest level since 2005. Pakistan, along with Mozambique, Senegal, Kenya, and Dominica, has some of the highest debt-to-export ratios, straining fiscal resources.
IMF repurchases for LMICs more than doubled in 2023 to $12.2 billion, with Egypt, Ukraine, and Pakistan leading in repayments. Meanwhile, Pakistan also ranked among the top recipients of personal remittances in 2023, receiving $26.6 billion, trailing only India, Mexico, the Philippines, and China.
