Pakistan rejects IsDB loan and reports $16 billion in foreign debt interest

Pakistan has rejected a $490 million commercial loan offered by the International Islamic Trade Finance Corporation (ITFC), the trade finance arm of the Islamic Development Bank (IsDB) Group. The government’s Debt Management Office declined the one-year facility because the estimated 8 percent interest rate exceeded the government's target of approximately 6 percent and was higher than the yield on Pakistan’s December 2027 bond.

Separately, State Bank of Pakistan (SBP) Governor Jameel Ahmed reported that the country has paid approximately $16 billion in interest on foreign loans over the last four years, averaging $4 billion annually. While total external debt stands at roughly $107 billion, the governor noted that the debt structure has improved, with multilateral and bilateral lenders now accounting for about 80 percent of the total.

The central bank aims to reduce annual foreign loan interest payments to below $3 billion next year and intends to increase foreign exchange reserves to $25 billion by June 2027.