Dollar slide raises new risks for Pakistan's external debt burden

• Dollar weakness could inflate debt-to-GDP ratio quickly.
• Loans dominate debt mix, with 56% multilateral or bilateral.
• External debt rose in June, dipped by September.

ISLAMABAD: As the US dollar risks weakening against other major currencies, Pakistan faces the prospect of higher external debt liabilities, with multilateral and bilateral loans accounting for 56% of its roughly $92 billion external debt stock, The News reported.

Pakistan’s external debt and liabilities have hovered around $130 billion in recent years, largely due to a stronger dollar versus currencies such as the euro, Japanese yen (JPY) and British pound (GBP).

In the last few days, the US dollar started weakening, raising the possibility that Pakistan’s external debt-to-GDP ratio is likely to explode in this quarter if the recent trends in currencies persist.

However, the Ministry of Finance in the Debt Policy Statement, going to submit before the parliament, stated that external debt increased by 6% YoY to stand at $91.8 billion as of the end June-25, reflecting an increase of $5 billion. 

During Q1-FY-26, it declined slightly by 0.4% ($0.35 billion) to stand at $91.4 billion at the end of September 2025. 

A major increase in external debt came from multilateral development partners (including the IMF), which increased by 8.7%, almost $4 billion. 

Borrowing from commercial banks was by $1.6 billion, largely due to a $1 billion loan secured against an ADB Policy-Based guarantee.