Pakistan’s reliance on external financing has increased noticeably during the first five months of the current fiscal year, reflecting ongoing pressures on the country’s economy and balance of payments.
Fresh data released by the Ministry of Economic Affairs shows that between July and November of FY2025–26, Pakistan secured foreign loans worth $3.01 billion, underlining the government’s continued dependence on international lenders and friendly countries to meet its financing needs. A significant portion of this inflow came from Saudi Arabia in the form of an oil financing facility. Under this arrangement, Islamabad has already received $500 million, offering some temporary relief to the country’s foreign exchange reserves. The facility is expected to provide a total of $1 billion during the ongoing fiscal year, helping Pakistan manage energy-related import payments amid tight financial conditions.
In rupee terms, the scale of foreign borrowing has increased sharply compared to last year. Official figures indicate that the government raised Rs858 billion through foreign loans during the first five months of FY2025–26. This represents a substantial rise from Rs741 billion borrowed during the same period of the previous fiscal year. The year-on-year increase of Rs117 billion, or nearly 15 per cent, highlights how external financing requirements have expanded amid fiscal and economic challenges.
This growing dependence on borrowing reflects the strain placed on public finances by slow revenue growth, high debt servicing costs, and the need to maintain essential imports. While external inflows help stabilize reserves in the short term, they also add to Pakistan’s long-term repayment obligations.
A closer look at the monthly breakdown reveals how borrowing fluctuated over the five-month period. In July, the government raised Rs198 billion, followed closely by Rs192 billion in August. Borrowing eased somewhat in September, dropping to Rs124 billion, before rising again to Rs133 billion in October. In November, external borrowing increased further, reaching Rs144 billion.
In dollar terms, Pakistan secured $515 million in external loans during November alone. This figure was around $40 million higher than October’s borrowing, which stood at approximately $475 million. Of the November inflows, $314.5 million came through bilateral and multilateral financing agreements, while $196.9 million was raised via Naya Pakistan Certificates, a scheme aimed at attracting investment from overseas Pakistanis.
The Saudi oil facility has emerged as a key component of Pakistan’s external financing strategy this year. After receiving $100 million under the facility in October, total receipts under this arrangement have now reached $500 million. With another $500 million expected later in the fiscal year, the facility is playing a crucial role in easing pressure on Pakistan’s import bill, particularly for energy supplies.
Alongside loans, Pakistan also received $54.1 million in grants during the first five months of FY2025–26, according to the Economic Affairs Division’s external financing report. While grants provide non-repayable support, their volume remains relatively small compared to loan inflows.
For the full fiscal year, the federal government has projected total external financing of more than $19.92 billion, covering loans, grants, and other inflows required to meet budgetary and external financing gaps. A major part of Pakistan’s external financing plan involves the rollover of existing deposits from friendly countries. During FY2025–26, the government intends to roll over $9 billion in safe deposits from Saudi Arabia and China, including $5 billion from Saudi Arabia and $4 billion from China. So far, $3 billion from Saudi Arabia has already been successfully rolled over, easing immediate repayment pressures.
In addition, a separate $3 billion rollover from the United Arab Emirates is planned, with responsibility for this transaction assigned to the central bank. The Ministry of Finance is overseeing the rollovers from Saudi Arabia and China, reflecting the critical role of diplomatic and financial relations in sustaining Pakistan’s external position.
According to projections by the International Monetary Fund (IMF), Pakistan is expected to receive total external inflows exceeding $25 billion during FY2025–26. This includes a target of $12 billion in rollovers from friendly countries and $2 billion under the IMF loan tranche programme. Additionally, under the IMF’s Resilience and Sustainability Facility, Pakistan is expected to receive two tranches amounting to around $400 million during the year.
Project financing remains another important pillar of the government’s funding strategy. Major multilateral lenders such as the World Bank Group and the Asian Development Bank (ADB) are expected to continue supporting development projects across various sectors. The government has also announced plans to issue $250 million worth of Panda Bonds in the Chinese market in January, diversifying its borrowing sources and tapping into new investor bases.
Under the current financing plan, Pakistan aims to secure $1.924 billion from the ADB and $1.6639 billion from the World Bank Group during FY2025–26. Additionally, the Islamic Development Bank is expected to provide $860 million, including $700 million in short-term financing.
The plan also includes issuing $400 million in bonds and raising $610 million through Naya Pakistan Certificates. Overall, the government targets $6.4 billion in project financing through bilateral and multilateral arrangements during the fiscal year.
While these inflows are crucial for maintaining foreign exchange stability and funding development projects, economists continue to warn about the long-term risks of heavy reliance on external borrowing. Rising debt levels increase repayment obligations and expose the economy to exchange rate and interest rate risks.
As Pakistan moves forward in FY2025–26, the challenge will be to balance short-term financial support with long-term economic reforms aimed at boosting exports, widening the tax base, and reducing dependence on foreign loans. The current figures underline both the scale of international support Pakistan is receiving and the urgency of strengthening domestic economic fundamentals.