Pakistan’s Total External Debt Stands at $127 Billion.

Pakistan’s External Debt Drops in 2022, but China’s Growing Influence Raises Concerns

The World Bank’s latest report paints a mixed picture of Pakistan’s external debt situation.

While overall debt stocks declined slightly from $130.87 billion in 2021 to $126.94 billion in 2022, the report highlights the growing dependence on China as a major creditor.

Read More: IMF Board to Meet on January 11 to Discuss Pakistan’s Loan Agreement

Key takeaways:

• Total external debt: Decreased to $126.94 billion by year-end 2022.
• China’s dominance: Pakistan accounts for two-thirds of the sevenfold increase in South Asian debt to China since 2012, rising from $6.4 billion to $42.9 billion.
• Debt breakdown: Public and publicly guaranteed debt comprises 44% multilateral (16% World Bank, 15% ADB), 37% bilateral (25% China, 4% Japan), and 19% private (9% bondholders, 10% other commercial).
• Debt ratios: External debt as a percentage of exports improved from 360% in 2021 to 320% in 2022, and debt as a percentage of GNI decreased from 38% to 34%.
• Debt service: Increased slightly from 34% of exports in 2021 to 42% in 2022.
• Transparency: Pakistan’s Debt Management Office has improved transparency by publishing debt bulletins and reports.

While the reduction in total debt and improved debt ratios are positive developments, the heavy reliance on China raises concerns about potential economic and political influence. Future debt management efforts should focus on diversifying creditor sources and ensuring sustainable borrowing practices.

Additional elements you might consider include:

• Briefly explain the significance of the “debt as a percentage of exports” and “debt as a percentage of GNI” ratios.
• Mention the potential risks associated with high debt service obligations.
• Highlight the importance of responsible debt management for Pakistan’s long-term economic stability.

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