ISLAMABAD: Pakistan’s government significantly increased its reliance onexternal borrowing during the first half of the current fiscal year, withofficial documents from the Ministry of Economic Affairs revealing a 29 percent rise in inflows compared to the same period last year. Total foreigneconomic assistance, including loans and grants, reached Rs1,272 billionbetween July and December, equivalent to $4.5 billion in US currency terms.This marks an increase of Rs280 billion over the previous fiscal year’scorresponding six months, highlighting the country’s ongoing efforts tobridge fiscal gaps and manage external account pressures while excludingseparate IMF disbursements.
The surge in external financing underscores Pakistan’s strategy to secureresources from multilateral and bilateral partners to support budgetrequirements and development projects. In rupee terms, non-project aidaccounted for Rs785 billion, while project aid contributed Rs487 billionduring the period. A substantial portion, Rs458.72 billion, was directedtowards budget support, providing immediate relief to fiscal operations.This composition reflects a balanced approach between immediate budgetaryneeds and longer-term infrastructure and sectoral investments funded byinternational creditors.
In dollar denomination, Pakistan received $4.5 billion in externalassistance over the six-month period, which is $904 million higher than the$3.6 billion obtained in the comparable timeframe of the preceding fiscalyear. This notable year-on-year growth demonstrates improved access toglobal financing sources despite persistent economic challenges. Theinflows exclude any additional support from the International MonetaryFund, which operates under separate arrangements and continues to play acritical role in the country’s macroeconomic stabilisation framework.
Bilateral partners contributed significantly to the overall assistance.Saudi Arabia extended an oil facility valued at Rs170 billion, offeringdeferred payment terms that ease immediate pressure on foreign exchangereserves. The Islamic Development Bank provided loans amounting to Rs137billion, focusing on developmental priorities aligned with sustainablegrowth objectives. These targeted contributions from key allies illustratethe importance of strategic bilateral relationships in supplementingmultilateral funding streams.
Monthly borrowing patterns indicate consistent reliance on external sourcesthroughout the half-year. The government secured Rs198 billion in July,over Rs192 billion in August, Rs124 billion in September, Rs133 billion inOctober, and Rs144 billion in November. In December, inflows included $97million under bilateral and multilateral agreements, alongside the issuanceof new Naya Pakistan Certificates worth $23.61 million, aimed at mobilisingdiaspora remittances and investment.
The projected external borrowing for the entire fiscal year stands atRs5,777 billion, according to official estimates. Achieving this targetwill be essential for meeting budgetary obligations, servicing existingdebt, and supporting economic recovery initiatives. The first-halfperformance suggests the government is on track, though sustained inflowswill depend on continued cooperation from development partners andadherence to reform benchmarks set by international institutions.
Despite the increased inflows, the rise in borrowing reflects broaderfiscal vulnerabilities, including high debt servicing costs and the needfor structural adjustments. External public debt levels remain elevated,with recent reports indicating ongoing pressures from repayments. Thegovernment paid substantial amounts in debt servicing during the period,emphasising the cyclical nature of borrowing to refinance obligations whilepursuing fiscal consolidation.
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Analysts view the higher assistance as a positive signal for short-termstability, particularly in bolstering foreign exchange reserves andsupporting import requirements. However, long-term sustainability hinges onboosting domestic revenue generation, export performance, and reducingreliance on external debt. The current trajectory aligns with efforts tostabilise the economy amid global uncertainties and domestic inflationarytrends.
The data from the Economic Affairs Division’s report provides acomprehensive snapshot of Pakistan’s external financial position. Ithighlights both achievements in securing increased support and thechallenges posed by persistent borrowing needs. As the fiscal yearprogresses, policymakers will focus on optimising these resources forproductive use while advancing reforms to enhance economic resilience.
Development Bank
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