Pakistan kicked off the new fiscal year with a notable surge in external financing, securing $695 million in July, a 59% year-on-year increase. According to fresh data from the Ministry of Economic Affairs, the bulk of the inflows came in the form of $675m in loans and $19m in grants, compared to $436m in the same month last year.
This boost follows the conclusion of Pakistan’s Extended Fund Facility (EFF) with the IMF, finalized after a delayed federal budget approval. The deal appears to have strengthened donor and lender confidence, with financing rising sharply across several categories.
A Closer Look: Budget Support Dominates the Inflows
While overall inflows grew, the composition of foreign financing shifted dramatically.
- Budget support loans saw the sharpest spike, climbing to $196m in July from a meager $1.23m last year.
- Non-project financing nearly tripled, hitting $448m, while project financing dipped by 20% to $246m.
This reflects Islamabad’s growing reliance on direct budgetary support over project-specific lending—a sign of ongoing fiscal stress and the need for liquidity rather than long-term development loans.
Multilateral and Bilateral Lenders Step Up
The government received $380m from multilateral lenders in July, nearly double last year’s inflows from the same sources. Bilateral financing, excluding Pakistan’s three strategic partners (Saudi Arabia, China, and the UAE), came in at $118m, slightly higher than last year’s $108m.
Combined, multilateral and bilateral lenders provided $498m in July, against an ambitious $6.4bn annual target. While this is an encouraging start, Pakistan will need a steady flow of commitments to stay on track with its financing plan.
Strategic Allies and Oil Facility Contributions
In addition to traditional lenders, Islamabad secured $100m from the Saudi Oil Facility in July. The facility is expected to provide $1bn over the course of the fiscal year, helping Pakistan manage its fuel import bill and reduce pressure on foreign reserves.
The government’s full-year financing strategy heavily leans on strategic deposits from Saudi Arabia and China, targeting $5bn and $4bn respectively, along with $3.1bn in commercial loans and $400m through international bonds.
Comparing to Last Year’s IMF Windfall
The contrast with July 2023 is stark. That month saw a windfall of $5.1bn, driven by the IMF’s $3bn Stand-By Arrangement (SBA), which unlocked $2bn from Saudi Arabia and $1.2bn directly from the IMF. This year’s July figure is more modest but reflects a more gradual and structured inflow plan rather than one-off disbursements.
Overseas Pakistanis Boost Investment
Another positive sign came from overseas investors, with inflows through Naya Pakistan Certificates jumping to $196m in July, up from $128m last year. The government is counting on $609m in such remittances this year, positioning these diaspora-driven investments as a key source of non-debt foreign exchange.
The Bigger Picture
Pakistan has set an ambitious $19.9bn target for foreign inflows this fiscal year, slightly higher than last year’s $19.4bn goal. Achieving it will depend heavily on sustained engagement with multilateral lenders, commercial creditors, and strategic partners.
While July’s figures mark a strong start, the numbers also underscore Islamabad’s growing dependence on budgetary support and external deposits rather than project financing—a reflection of immediate fiscal challenges and a tight external financing environment.
