LIKE other developing countries, Pakistan seeks to achieve a higher, impact-oriented investment rate to sustain economic growth. In this regard, its development partners provide knowledge, policy advice and financial assistance to support economic reforms that promote sustainable development. The priority of the federal government, led by Prime Minister Muhammad Shehbaz Sharif, is to strengthen engagement with development partners to achieve sustainable social and economic growth, reduce poverty and inequality, expand equitable access to social services, create employment opportunities for youth and address external and fiscal imbalances for greater macroeconomic stability.
Foreign Economic Assistance (FEA) disbursements remained below budgeted estimates during fiscal year 2025-26. Against the projected allocation, actual receipts were lower, while Pakistan is expected to receive about US$23.38 billion in external assistance during 2026-27. This financing will come from a mix of bilateral and multilateral partners, foreign commercial banks, bilateral deposits, the Naya Pakistan Certificates and the International Monetary Fund (IMF). Foreign assistance also supports autonomous organizations such as WAPDA, the National Transmission and Dispatch Company (NTDC), the National Highway Authority (NHA) and the Power Division. The Higher Education Commission (HEC) and SUPARCO received foreign assistance during 2025-26 but are not among the beneficiaries in the current fiscal year.
External financing is derived from a combination of project loans and grants, programme loans and other borrowing instruments. Project loans and grants are provided by international financial institutions and friendly countries for specific development projects undertaken by the federal and provincial governments as well as autonomous bodies.
Some projects are executed outside the Public Sector Development Programme (PSDP) through separate financing arrangements. Programme loans are generally meant for budgetary support and are linked to the achievement of agreed policy reforms and development targets, while other financing includes Islamic Development Bank facilities, sovereign bonds, Sukuk and borrowings from non-traditional sources.
Pakistan’s bilateral development partners include China, Denmark, France, Germany, Italy, Japan, Korea, Kuwait, Oman, Saudi Arabia and the United States. Major multilateral partners include the Asian Development Bank (ADB), Asian Infrastructure Investment Bank (AIIB), European Investment Bank (EIB), International Bank for Reconstruction and Development (IBRD), International Development Association (IDA), International Fund for Agricultural Development (IFAD), Islamic Development Bank (IsDB), PEC Fund, the United Nations and the IMF.
The World Bank, ADB, AIIB and IsDB remain Pakistan’s principal multilateral development partners. Besides providing financing, they have conducted important diagnostic studies and formulated well-aligned medium-term country partnership strategies. Pakistan’s economic performance is also closely monitored by leading international credit rating agencies, including Fitch, Moody’s and S&P, whose assessments influence the country’s access to international capital markets.
The fundamental objective of foreign or external financial assistance is to promote economic and social development in developing countries. It represents the transfer of financial resources, goods or technical expertise from donor countries and international financial institutions to encourage economic growth. Such assistance may be bilateral or multilateral and serves not only to finance development projects but also to bridge investment and balance-of-payments gaps.
—The writer is Lahore-based columnist and retired Deputy Controller (News), Radio Pakistan, Islamabad.
