ISLAMABAD: The outlook for Pakistan’s financing from abroad has been quite promising since the beginning of FY26. The flows of foreign aid in Pakistan jumped by almost 20%, totaling $6.594 billion from July to March as compared to $5.507 billion during the corresponding period last year – an indication of increased engagement as well as growing dependence on borrowing.
The Economic Affairs Division released the figures on Sunday, offering the most detailed analysis yet of how Pakistan managed to pay off its foreign liabilities during the first three-quarters of the fiscal year.
The $9.7 Billion Number Revealing the Truth Behind the Figures
The foreign aid coming into Pakistan from other countries at $6.594 billion is not the full picture. The IMF disbursed $1.2 billion in December as per the terms of the Extended Fund Facility agreement. Another notable injection is the $3 billion that Saudi Arabia provided in March and April.
These additions take the aggregate external receipts of Pakistan for the nine months of FY26 above $9.7 billion – an amount that highlights the extent of external finance needed by Pakistan to sustain macroeconomic stability and replenish the forex reserves lost during the 2022-23 period.
Foreign aid inflow to Pakistan through March alone reached $731.3 million, indicating a rise of 32% compared to the corresponding month of FY25 and indicating growing disbursement activity for the last quarter.
Lending Takes Center Stage Grants Fall Steeply
The nature of foreign assistance flows to Pakistan is reflective of a fundamental change that must be noted. Foreign lending increased to $6.494 billion from $5.37 billion in the year prior, thus reaffirming the dominant role of lending in driving inflows. On the other hand, grants have fallen by 27% to merely $100.3 million – thus restricting Pakistan’s ability to access non-repayable foreign finance precisely when repayment pressures arise.
ALSO READ: Pakistan Receives $1.2 Billion IMF Financing Under EFF and RSF Deal
The amount invested through project financing was $2.486 billion, and that of non-project aid stood at $4.108 billion. Budgetary support financing, which is most affected by conditionalities of IMF programmes, had a total of $2.449 billion within the nine months.
The World Bank Takes the Lead in Multilateral Disbursements
Of all multilateral development partners, the World Bank made the largest contribution by making disbursements worth $1.205 billion in the nine months under review. The second highest contributor in terms of disbursements was the Asian Development Bank, which disbursed $727 million, while the Islamic Development Bank disbursed $542 million.
Overseas Pakistanis Make Their Mark
While the biggest foreign aid donor in terms of loan inflows in the 9-month period of 9MFY26 was neither an international organization nor a country’s government, overseas Pakistanis have emerged as the greatest source, having made a contribution of $2.037 billion via Naya Pakistan Certificates, which is an increment of 40% from the previous year.
This indicates increasing faith within the diaspora community in investments through government channels, facilitated by lucrative rates of return and enhanced signals of economic stability emanating from Islamabad. In light of Pakistan’s history of inefficient diaspora capital utilization for financial assistance purposes, an increase of 40% represents a significant achievement.
Implications of the Figures Ahead
Such large flows of foreign aid into Pakistan create valuable breathing space for the Pakistani economy, which is currently under the pressures of meeting IMF conditionality targets, high debt service payments, and the problem of energy circular debts. The figures clearly reveal that the channels for foreign finance have been open and operational, although the growing dependence on loans indicates that every penny coming into Pakistan will need to be paid back by the domestic economy in the future.
