Pakistan's foreign borrowing drops 27% in July-February

Pakistan borrowed $4.819 billion from various sources during the first eight months of the fiscal year 2025, marking a 27% decline compared to the $6.6 billion borrowed in the same period last year, according to Economic Affairs Division.

Despite the drop, the government aims to achieve its $19.2 billion target by June 30.

Multilateral lenders contributed $2.45 billion during this period, slightly lower than the $2.6 billion borrowed last year. The Asian Development Bank (ADB) emerged as the top lender, providing $1.09 billion.

Other contributors included the World Bank’s International Development Association ($634 million), the Islamic Development Bank ($148 million), and the International Bank for Reconstruction and Development ($203 million).

Bilateral funding also saw a sharp decline, totaling $247 million from July to February, down from $769 million in the same period last year. Major bilateral partners included China, which provided $97 million, France with $103 million, and Kuwait contributing $24 million.

The decline comes as Pakistan works to stabilize its finances following a $7 billion bailout from the International Monetary Fund (IMF) in September 2024.

The IMF board is expected to review Pakistan's request for the completion of a $1 billion tranche under its Extended Fund Facility (EFF) in May. The EFF is designed to assist countries facing medium-term balance-of-payments challenges caused by structural weaknesses.

The World Bank's International Debt Report 2024 ranked Pakistan among the top three IMF loan recipients this year. However, the report highlighted Pakistan's rising debt-to-export and debt-to-revenue ratios, signaling fiscal vulnerabilities.

For FY25, Pakistan’s total external debt obligations are projected at $26.1 billion, which includes $22.1 billion in principal repayments and $4 billion in interest. To manage these obligations, the government has already repaid $6.4 billion and secured commitments for rollovers of $12.3 billion, along with $3.7 billion in commercial loans.

Remaining obligations of $3.7 billion are expected to be covered through a mix of multilateral loans and bilateral commitments from key partners.

These financial arrangements aim to provide the necessary assurances for Pakistan to meet its financing needs as the fiscal year progresses.