By Abdul Ghani

Loans continued to dominate Pakistan’s foreign economic assistance during the first seven months of the current fiscal year, while grants constituted only a small portion of the external financing received during the period, according to official data.

The Ministry of Economic Affairs’ latest report on foreign economic assistance shows that Pakistan received a total of $5,170.34 million in external assistance during July–January FY2025-26. Of this amount, loans accounted for the overwhelming share, while grant inflows remained comparatively limited.

According to the report, loans amounted to $5,101.22 million during the July–January period, while grants totaled only $69.11 million. This means that more than 98 percent of the foreign assistance received during the period was in the form of loans.

The figures also show that in January 2026 alone, Pakistan received $616.68 million in loans and $9.03 million in grants, bringing the total disbursement for the month to $625.70 million.

The report indicates that the bulk of loan financing came from multilateral development institutions, bilateral partners, commercial banks, and specialized financial facilities. These loans are typically provided for development projects, budgetary support, and other financial requirements.

Multilateral institutions remained among the largest sources of loan financing. During July–January FY2025-26, multilateral partners disbursed $2,092.72 million in loans and $33.97 million in grants, bringing their total contribution to $2,126.69 million.

Major multilateral lenders included the Asian Development Bank, the International Bank for Reconstruction and Development, the International Development Association, the Asian Infrastructure Investment Bank, the Islamic Development Bank, and the International Fund for Agricultural Development.

Bilateral partners also contributed to loan financing. Bilateral disbursements during the seven-month period totaled $931.88 million, including both loans and grants. Countries providing assistance included China, Saudi Arabia, Japan, Germany, France, Denmark, Korea, Kuwait, and the United States.

A substantial portion of the loan inflows was received in the form of non-project financing, which primarily supports the government’s fiscal and external financing needs. According to the report, non-project assistance reached $3,268.86 million during the July–January period.

Within this category, financing under the Saudi Fund for Development’s oil facility accounted for $700 million during the fiscal period, including $100 million disbursed in January. The facility provides financial support for the import of petroleum and crude oil.

Another major component of non-project financing was the National Power Construction (NPC) facility. Disbursements under conventional NPC financing reached $405.64 million during July–January FY2025-26, while Islamic NPC financing amounted to $1,082.77 million during the same period.

Pakistan also received $209.51 million from the International Monetary Fund during the reporting period, contributing to overall external financing.

Commercial bank financing also formed part of the loan inflows. The report shows that $144.42 million was disbursed through commercial banks during July–January FY2025-26, including $88.12 million received in January.

In comparison to loan financing, grants represented only a small share of total foreign assistance. Grants are typically provided for specific development projects, technical cooperation, or social sector initiatives.

The report indicates that project financing accounted for $1,901.48 million during the July–January period. These funds were allocated to a wide range of development initiatives across sectors such as energy, infrastructure, water management, urban development, and social services.

The data underscores the continued reliance on loan-based external financing to support Pakistan’s development programs and fiscal requirements during the current fiscal year.

Credit: INP-WealthPk