Foreign assistance to Pakistan rises 20% in first half of FY26

Foreign assistance to Pakistan rose 20% in the first half of fiscal year 2025-26 to $4.51 billion, driven largely by higher multilateral lending and a sharp increase in inflows in December, official data showed.

In the same period a year earlier, foreign financial assistance stood at about $2.67 billion. For the current fiscal year, the government has estimated total foreign assistance of around $19.9 billion, according to the data.

Figures released by the Economic Affairs Division showed that multilateral and bilateral loans and grants in December alone totaled $1.47 billion, nearly three times higher than the $511.49 million recorded in November.

During the July-December period, Pakistan received $1.07 billion in bilateral loans and grants, while multilateral financing amounted to $1.97 billion.

Bilateral grants during the six-month period totaled $31.68 million, with Japan emerging as the largest contributor at $11.86 million, followed by China with $10.57 million and Saudi Arabia with $3.31 million.

Total bilateral loans reached $1.04 billion in the first half of the fiscal year. These included $255.6 million in Chinese guaranteed loans, an additional $72.28 million from China, $71.15 million from Denmark, $15.61 million from France, and a $600 million loan from Saudi Arabia under an oil financing facility.

Multilateral grants and loans

Multilateral grants during the July-December period amounted to $28.95 million. Of this, $15.40 million came from the International Bank for Reconstruction and Development, $8.18 million from the International Development Association, $2.72 million from the International Fund for Agricultural Development, and $0.27 million from the Asian Development Bank.

Multilateral loans totaled $1.97 billion in the same period. The International Development Association was the largest lender with $580.77 million, followed by the Asian Development Bank at $549.24 million. The Islamic Development Bank extended $483.78 million in short-term financing, while the International Bank for Reconstruction and Development provided $221.73 million.

Additional loans included $52.49 million from the Islamic Development Bank and $21.39 million from the International Fund for Agricultural Development.

Under the federal budget for FY26, Pakistan has projected $147.93 million in multilateral and bilateral grants and $6.4 billion in loans. Disbursements under the Naya Pakistan Certificates totaled $1.2 billion during the July-December period.

To support foreign exchange reserves, Pakistan also maintained $9 billion in term deposits, including $5 billion from Saudi Arabia and $4 billion from China, the data showed.

The Economic Affairs Division noted that lending under the International Monetary Fund’s Extended Fund Facility is not reflected in its accounts or those of the Ministry of Finance, as IMF financing is classified as balance-of-payments support and recorded on the balance sheet of the State Bank of Pakistan.

An independent economist said the rise in foreign inflows offers short-term relief to Pakistan’s external financing pressures but highlights continued reliance on debt.

“While the increase in disbursements helps stabilize reserves and meet near-term obligations, the composition of inflows shows a heavy tilt toward loans rather than grants,” the analyst said. “Sustained improvement will depend on export growth, foreign investment and structural reforms rather than continued borrowing.”