Islamabad, February 18, 2025 – Pakistan received external financing worth $669.92 million in January 2025, marking a 28% decrease compared to the previous month, but a substantial 102% increase from the same period last year. This financing comes from various sources, providing much-needed support to Pakistan’s fiscal needs. However, the total amount remains below the government’s ambitious budget estimates, highlighting ongoing challenges in securing foreign assistance.
The data, released in the latest monthly report by the Economic Affairs Division (EAD), shows that the total financing for the first seven months of the fiscal year 2024-25 (7MFY25) reached $4.28 billion. This figure falls significantly short of the annual target of $19.39 billion, as outlined in the country’s fiscal budget for FY25. The report indicates a gap of over $15 billion between the financing secured and the budgetary expectations set by the government.
For comparison, in the previous fiscal year, the government had estimated foreign assistance of $17.62 billion but was only able to secure $9.81 billion. Despite this shortfall, the inflows received in January, although lower than expected, were crucial in supporting the country’s external financing requirements.
The financing secured in January 2025 included $618.96 million in loans and $11.65 million in grants. Among the total, significant portions came from multilateral and bilateral development partners, contributing $470.69 million in disbursements. Of this amount, $458 million came from multilateral sources, while $12.68 million came from bilateral development partners. However, despite these inflows, they remain far from meeting the targets for the fiscal year.
The financing obtained through foreign commercial loans amounted to $199.23 million in January, adding to a total of $1.13 billion for 7MFY25. This borrowing was primarily sourced from Naya Pakistan Certificates. However, Pakistan has failed to secure any foreign commercial loans from international banks so far in FY25, despite a budget estimate of $3.78 billion for this fiscal year. The absence of this type of financing puts additional strain on the country’s foreign exchange reserves.
A significant portion of the financing in January 2025 was in the form of non-project aid, totaling $85.87 million. This aid was provided as program and budgetary support to help restructure Pakistan’s economy. As of January, the total loans for non-project aid in 7MFY25 stood at $378.19 million.
The foreign inflows have played a vital role in bolstering Pakistan’s foreign exchange reserves. However, these inflows are still far from sufficient to meet the government’s planned foreign assistance targets. According to government estimates, the country needs to secure substantial foreign financing in the remaining months of the fiscal year to avoid further strains on its external account.
Looking ahead, the government will likely need to explore additional avenues for securing foreign loans and grants, as well as increasing efforts to attract foreign commercial lending. The gap between the country’s financing needs and what has been secured so far is substantial, and it remains to be seen how the government will address this shortfall in the coming months.
Despite these challenges, the foreign assistance received thus far has provided some relief to the Pakistani economy, though much remains to be done to meet the fiscal year’s full funding requirements.