Pakistan economy in doldrums: Inflow of foreign loans rises in first 5 months; borrowing up from last year

Pakistan saw a 14% rise in foreign loans and grants during the first five months of the current fiscal year (July–November 2025), reaching $3.032 billion compared to $2.667 billion in the same period last year.

Of the total inflows, foreign loans rose 46.2% to $2.521 billion, while grants fell by 43% to $54 million. In November alone, inflows amounted to $511 million, slightly higher than October’s $471 million but 46% lower than November 2024.

Earlier this month, the International Monetary Fund (IMF) approved a $1.2 billion disbursement. The current inflow figures do not yet include this latest IMF release, as reported by Dawn.




The government has set a target of $19.9 billion in total foreign inflows for the current fiscal year, slightly higher than last year’s $19.4 billion.

The Ministry of Economic Affairs reported that of the $3.032 billion inflows, $1.157 billion was for project financing, while $1.875 billion comprised non-project inflows. Loans for budget support stood at $966 million, against an annual target of $13.5 billion. Additionally, Pakistan mobilised $500 million under the Saudi Oil facility at a planned rate of $100 million per month.

Reliance on bilateral and multilateral lenders

Inflows from bilateral and multilateral lenders totalled $2.066 billion in the first five months, compared to $1.73 billion in the same period last year, according to Dawn.

Pakistan received $1.258 billion from multilateral lenders and $808 million from other bilateral lenders. Remittances from overseas Pakistanis also rose to $966 million, exceeding the annual target of $609 million.

The IMF’s support comes amid Pakistan’s heavy reliance on external financing. The country narrowly avoided default in 2023 and is now among the Fund’s largest borrowers after Argentina and Ukraine.

Current IMF disbursement and support

Earlier this month, the IMF approved a $1.2 billion disbursement under Pakistan’s ongoing Extended Fund Facility and Resilience and Sustainability Facility programmes.

This latest move lifts Pakistan’s total inflows from the IMF to roughly $3.3 billion and will be reflected in official accounts in the coming weeks.

IMF officials have highlighted that Pakistan’s policy implementation has remained broadly consistent with programme goals, even after the recent monsoon floods that killed more than 1,000 people.

The Fund observed that fiscal discipline, including maintaining a primary surplus of 1.3% of GDP in FY25, helped preserve macroeconomic stability. Gross reserves reached $14.5 billion at the end of FY25, up from $9.4 billion a year earlier and are expected to expand further in FY26.

The Fund also stressed that Pakistan’s ongoing reform measures, including tax policy adjustments, energy sector restructuring and governance improvements, are critical to maintaining financial stability and supporting medium-term growth.

IMF imposes new conditions

As part of ongoing support, the IMF has imposed 11 new conditions on Pakistan, bringing the total to 64 over 18 months. These measures address governance flaws, corruption, tax reforms, the power sector and structural inefficiencies. Key directives include:

• Publishing asset declarations of high-level federal and provincial officials by December 2026.
• Developing action plans to tackle corruption in vulnerable departments.
• Reviewing cross-border remittance costs and barriers by May next year.
• Introducing reforms in the local currency bond market and the sugar industry.
• Strengthening the Federal Board of Revenue’s efficiency and implementing tax reform strategies.
• Preparing private-sector participation frameworks in the power sector and enacting legislative amendments to improve compliance.