By Staff Reporter
ISLAMABAD: Pakistan locked in $12.4 billion in foreign debt for fiscal 2025, clinching a $3.4 billion loan just in time to hit its IMF target, an Economic Affairs Division (EAD) report showed on Tuesday.
The late rush of funds underscored Pakistan’s scramble to shore up its finances, with nearly 43% of the total foreign assistance, $5.25 billion, disbursed in June alone. That’s a significant jump from the $6.89 billion received over the preceding 11 months from July to May, driven largely by commercial loans from financial institutions in China and the United Arab Emirates.
When factoring in rollovers and cash deposits held at the central bank, total external inflows for FY25 hit roughly $24 billion. That figure blew past the government’s budgeted target of $19.4 billion, which included $9 billion in rollovers from friendly countries. The EAD report, however, didn’t clarify how much of those targeted rollovers actually materialized.
The EAD report pegged total fresh loans and grants at $12.14 billion for FY25, a 24% increase from $9.81 billion in the prior fiscal year. Program and budgetary support dominated, accounting for $8.6 billion—or 71% of the total, up 28% from $6.7 billion in FY24. Project financing also ticked up 17%, reaching $3.5 billion from $3 billion last year.
Multilateral lenders stepped up, disbursing $4.84 billion compared to $4.28 billion in FY24. Bilateral inflows, however, slumped 35% to $600 million from $920 million the previous year. Together, multilateral and bilateral contributions totaled $5.44 billion, a modest rise from $5.2 billion in FY24.
Foreign commercial borrowing stole the spotlight, soaring 330% to $4.3 billion from the prior year. The government had budgeted $3.8 billion from commercial banks for FY25, a goal it exceeded despite initial hesitation from lenders. Meanwhile, overseas Pakistanis chipped in $1.9 billion through Naya Pakistan Certificates, a 73% jump from $1.1 billion in FY24.
Among multilateral players, the Asian Development Bank led the pack with $2.13 billion in disbursements, up from $1.3 billion last year. The World Bank followed with $1.77 billion. Notably, the EAD data excludes $2 billion disbursed by the IMF under its $7 billion Extended Fund Facility, tracked separately by the State Bank of Pakistan.
Pakistan’s fiscal maneuvering paid off in some areas but fell short in others. The government failed to hit its $1 billion target for international bond issuance in FY25, a setback that underscores the challenges of tapping global capital markets amid heightened risk perceptions. On the horizon, a projected $9 billion from China and Saudi Arabia, including $5 billion in time deposits from Riyadh and $4 billion in SAFE deposits from Beijing, remains pivotal to closing the country’s external financing gap under the IMF program.
The reliance on commercial borrowing to meet the IMF benchmark highlights both agility and vulnerability. Exceeding the $3.8 billion commercial loan target was a win, but the 330% year-on-year spike signals a shift toward costlier debt, a trend that could strain Pakistan’s balance sheet down the road.
Pakistan’s $12.4 billion haul in FY25 reflects a broader push to stabilize an economy long battered by fiscal deficits, currency pressures, and external shocks. The IMF program, with its stringent conditions, remains the linchpin of this effort, demanding consistent inflows to keep the country afloat. The $2 billion already disbursed under the $7 billion Extended Fund Facility, though not captured in the EAD data, is a lifeline Islamabad can’t afford to lose.
Yet the surge in debt inflows comes with a catch. Heavy dependence on external financing, particularly high-cost commercial loans, raises the stakes for Pakistan, which must now juggle repayment pressures while pursuing structural reforms. The economy’s resilience hinges on securing those looming $9 billion inflows from China and Saudi Arabia, without which the IMF-mandated targets could slip out of reach.
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