By Staff Reporter
ISLAMABAD: Pakistan kicked off the new fiscal year with a robust 59 percent increase in foreign inflows, totalling $695 million in July, driven by a sharp rise in loans and grants following the finalisation of a critical International Monetary Fund (IMF) agreement.
The surge underscores Islamabad’s efforts to stabilise its economy amid ambitious financing targets and ongoing central bank interventions to bolster foreign exchange reserves.
According to data from the Ministry of Economic Affairs, July inflows comprised $675 million in foreign loans and $19 million in grants, a marked improvement from the $426 million in loans and $10.5 million in grants recorded in the same month last year. The uptick follows the approval of Pakistan’s Extended Fund Facility (EFF) with the IMF, which had faced delays due to the federal budget process but has now unlocked significant multilateral and bilateral support.
The July figures reflect a mixed performance across financing categories. Project financing fell 20% to $246.47 million from $307 million a year earlier, signalling a slowdown in development-related disbursements.
However, non-project financing, which includes budget support and program loans, soared 250% to $448 million from $129 million in July 2024. Budget support loans alone jumped to $196 million, a staggering increase from just $1.23 million a year ago, despite a lower annual target of $13.5 billion for such financing compared to $15 billion last year.
Multilateral lenders, excluding the IMF, contributed $380 million in July, up from $201 million a year earlier, even as the full-year target for multilateral inflows was trimmed to $4.5 billion from $5.05 billion. Bilateral lenders, excluding strategic allies, added $118 million, slightly above the $108 million recorded in July 2024, against an annual target of $1.36 billion. Combined, multilateral and bilateral inflows reached $498.3 million, aligning with the government’s $6.4 billion target for the fiscal year.
Pakistan also secured $100 million from the Saudi Oil Facility in July, part of a $1 billion annual target. Meanwhile, remittances through Naya Pakistan Certificates surged to $196.2 million, up from $128 million a year earlier, with the government projecting $609 million from this channel for the fiscal year.
The country has set a $19.9 billion target for foreign inflows in the current fiscal year, slightly above last year’s $19.4 billion goal. This includes $6.4 billion from multilateral and bilateral lenders, $400 million from international bonds, $3.1 billion in commercial loans, and significant contributions from strategic allies, including $5 billion in time deposits from Saudi Arabia and $4 billion in SAFE deposits from China.
The government’s financing strategy comes against the backdrop of a $25.9 billion external debt repayment obligation for fiscal 2026, roughly in line with the previous year. This includes $22 billion in principal and $4 billion in interest, with approximately $16 billion expected to be rolled over, leaving $10 billion to be repaid, including $6 billion in principal and $4 billion in interest.
The State Bank of Pakistan (SBP) has been aggressively intervening in the currency market to shore up reserves, purchasing $7.76 billion since June 2024, according to Topline Securities, citing SBP data. In May alone, the central bank bought $522 million in foreign currency, following $473 million in April.
“The SBP’s reserves have risen from $9.4 billion in June 2024 to $11.5 billion in May 2025, though with fluctuations due to external repayments and inflows,” said Saad Hanif, head of research at Ismail Iqbal Securities Limited.
“The buildup in September 2024, November 2024, and May 2025 highlights support from multilateral sources, while declines in early 2025 reflect repayment pressures.” Hanif noted that the SBP’s interventions, at times exceeding $1 billion, have been critical in maintaining reserves above $10 billion, ensuring exchange rate stability and providing a buffer against external shocks. The central bank projects reserves will climb to $15.5 billion by December 2025 and reach $17 billion by June 2026.
Pakistan’s economy has shown signs of stabilization, posting a $2.1 billion current account surplus in fiscal 2025, supported by the IMF program, robust remittances, lower inflation, reduced interest rates, and currency stability.
However, the first month of fiscal 2026 recorded a $254 million current account deficit, an improvement from the $348 million deficit in July 2024. Last year’s inflows were bolstered by a $2.89 billion loan haul in July 2023, driven by a nine-month IMF Stand-By Agreement that unlocked $2 billion from Saudi Arabia and $1.2 billion from the IMF, contributing to a total of $5.1 billion for the month. This year’s $695 million, while lower than the 2023 peak, reflects a more diversified inflow mix and sustained multilateral support.
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