ISLAMABAD (PEN) : Amid a sharp 66% drop in foreign inflows during the first half of FY25, Pakistan’s Economic Affairs Division (EAD) withheld its monthly data on external assistance for over a month. This came after a partial recovery, with the decline easing to 38% over the seven-month period.
The EAD released two sets of debt data. In the first six months of the current fiscal year, foreign debt inflows totaled $3.6 billion, marking a dramatic 66% decrease from $5.968 billion during the same period last year. For the first time, the data wasn’t posted last month as it usually is in the third week of the following month.
The second set of data revealed that total inflows for July-January were $4.585 billion, a 38% drop compared to $6.31 billion in the same period last year. The decline is largely attributed to delays in securing an International Monetary Fund (IMF) bailout and the subsequent $1 billion disbursements.
In its monthly Foreign Economic Assistance (FEA) report, the EAD revealed that, against an annual target of $19.4 billion, total inflows from July to January amounted to $4.58 billion, compared to $6.31 billion in the same period last year. This figure does not include about $1 billion disbursed by the IMF at the end of September 2024, which the State Bank of Pakistan accounts for separately, pushing the total inflows to $5.58 billion.
Looking back, last year’s IMF arrangements included a 9-month, $3 billion Standby Arrangement, which helped Pakistan secure $2.9 billion in July 2023 alone. In contrast, July 2024 saw a meager $436 million in inflows. However, January 2024 showed improvement, with monthly inflows reaching $830 million compared to $332 million in January 2023.
Out of the total $4.585 billion received in the first seven months, $2.54 billion was directed towards budgetary support or program loans, while $2.045 billion was allocated for project financing. This was in contrast to the previous year when more than $4.5 billion was secured for project aid and over $1.8 billion for program loans.
Bilateral disbursements fell to $329 million, compared to $794 million in the same period last year. Multilateral inflows totaled $2.322 billion, showing a slight decline from $2.4 billion in the previous year. Commercial lenders also offered $500 million, marking a minor recovery after they largely stayed away from financing Pakistan last year.
The government had anticipated $3.8 billion in financing from foreign commercial banks for the current year, but this target is off to a slow start, primarily due to the delayed IMF agreement. The government had also hoped for $1 billion through international bonds, but this has yet to materialize.
A critical projection for the current fiscal year is $9 billion in inflows from bilateral partners like China and Saudi Arabia, including a $5 billion time deposit from Saudi Arabia and a $4 billion China SAFE deposit. While these funds have not yet been realized, they are expected in the second half of the year, playing a crucial role in bridging the external financing gap under the IMF program.
Additionally, Pakistan saw $1.127 billion in inflows through Naya Pakistan Certificates from overseas Pakistanis, a significant increase from $590 million last year.
The Asian Development Bank (ADB) led the multilaterals with a $1.49 billion disbursement, surpassing the World Bank, which provided $1.058 billion. In contrast, the ADB had disbursed only $620 million during the same period last year, highlighting a shift in multilateral support for Pakistan.
Despite these challenges, the country remains hopeful that the second half of FY25 will see improvements, especially with critical inflows expected from key partners.
