Foreign Loan Inflows Surge by a Quarter: $4.5 Billion Boost Eases Pakistan’s Financing Pressure
Foreign loan inflows surge by a quarter in the first half of FY26, giving Pakistan $4.5 billion in external assistance between July and December 2025–26. This rise mainly comes from multilateral and bilateral lenders, while a separate $1.2 billion from the IMF pushes total external inflows for the period to around $5.7 billion.
For a government facing tight financing needs and a heavy repayment schedule, this foreign loan inflows surge by a quarter offers short‑term breathing space. However, it also raises questions about growing debt and dependence on external creditors.
What Does “Foreign Loan Inflows Surge by a Quarter” Really Mean?
When reports say foreign loan inflows surge by a quarter, they refer to a 25 percent increase in total external loans and grants (excluding IMF) compared to the same period last year. In 6MFY26, Pakistan received $4.507 billion in such inflows, up from $3.603 billion in the first half of the previous year.
Within this, foreign loan inflows themselves surged to about $4.445 billion, compared to $2.673 billion last year, which is a jump of more than 66 percent. Grants, on the other hand, fell sharply to just $62.5 million from $99 million, showing a 37 percent decline and highlighting a shift towards more debt and fewer free funds.
Monthly Snapshot: December Drives the Foreign Loan Inflows Surge by a Quarter
The foreign loan inflows surge by a quarter owes a lot to a strong December. In that month alone, Pakistan received about $1.475 billion in external inflows, which lifted the total for July–November by almost 48 percent.
December 2025 inflows were almost 59 percent higher than the $930 million received in December 2024, and they also beat the $511 million in November and $471 million in October. This heavy year‑end disbursement pattern is common when lenders rush to release approved funds before calendar or programme deadlines.
How Do Multilateral and Bilateral Lenders Fit into the Foreign Loan Inflows Surge by a Quarter?
A large part of the foreign loan inflows surge by a quarter comes from multilateral and bilateral partners. In the first half of FY26, Pakistan received about $1.967 billion from multilaterals (excluding the IMF) against a full‑year target of $5 billion.
At the same time, inflows from bilateral lenders reached roughly $1.072 billion, compared to just $312 million in the same period a year earlier, a jump of around 235 percent. This shows that key countries and development partners stepped up project and budget support even as commercial borrowing from markets remained weak.
Overall, combining multilateral and bilateral flows, the foreign loan inflows surge by a quarter took total official disbursements to about $3.04 billion in 6MFY26, against a full‑year target of $6.4 billion.
Which Institutions Drove the Foreign Loan Inflows Surge by a Quarter?
Several major lenders played important roles in the foreign loan inflows surge by a quarter.
- The World Bank emerged as the biggest multilateral lender, disbursing around $802 million in the first half, up from $492 million a year earlier, a rise of about 63 percent.
- The Asian Development Bank (ADB) provided around $609 million, though some reports note mixed trends compared to previous years and earlier disbursement patterns.
- The Islamic Development Bank (IsDB) increased its support to about $535 million, including roughly $484 million in short‑term trade or oil‑related credit to offset reduced commercial bank lending.
On the bilateral side, the foreign loan inflows surge by a quarter includes about $600 million from the Saudi oil facility over six months, with disbursements averaging close to $100 million per month. This soft oil financing helps Pakistan manage its import bill and save hard currency.
Foreign Loan Inflows Surge by a Quarter, But Grants Fall and Debt Rises
While headline numbers show that foreign loan inflows surge by a quarter, the quality of these inflows matters. Grants fell to just $62.5 million in 6MFY26, down from $99 million in the same period last year, a drop of 37 percent.
This means most of the foreign loan inflows surge by a quarter consists of new debt, not free support. Over time, higher borrowing increases external debt servicing needs and puts pressure on future budgets and foreign exchange reserves.
Experts argue that while borrowing can stabilise the economy in the short term, Pakistan must improve exports, remittances, and investment inflows to reduce long‑term dependence on such loans.
How Does the IMF Tranche Link to the Foreign Loan Inflows Surge by a Quarter?
The Dawn story notes that the foreign loan inflows surge by a quarter does not include the recent IMF disbursement. Earlier in December, Pakistan received about $1.2 billion from the IMF after a successful review of its programme.
If this IMF amount is added, total external inflows for July–December rise to around $5.7 billion, further strengthening reserves and helping Pakistan meet near‑term external payment needs. However, IMF funds also come with reform conditions and future repayment obligations, so they are not a permanent solution.
Foreign Loan Inflows Surge by a Quarter, But Targets Remain High
Even with the foreign loan inflows surge by a quarter, Pakistan still has a long way to go to meet its full‑year external financing goals. The total foreign inflow target for FY26 stands at about $19.9 billion, slightly higher than last year’s $19.4 billion plan.
By the mid‑year mark, the government had secured about $4.507 billion (excluding IMF), which is roughly one‑quarter of the annual target. This means the second half of the year will require continued strong support from multilaterals, bilaterals, and possibly commercial lenders if Pakistan wants to avoid funding gaps.
Role of Remittances Alongside the Foreign Loan Inflows Surge by a Quarter
Alongside the foreign loan inflows surge by a quarter, remittances from overseas Pakistanis also showed improvement. Inflows through products like Naya Pakistan Certificates reached around $1.2 billion in the period mentioned, up from about $928 million the year before.
These remittances provide non‑debt foreign exchange, which supports reserves without adding to external liabilities. For a healthier balance of payments, experts stress that such non‑loan inflows and export growth must accompany any foreign loan inflows surge by a quarter.
