Govt secured $26.7b in loans in FY25
Pakistan secured a record $26.7 billion in foreign loans during the last fiscal year, nearly half of it in the form of rollovers of previously obtained loans, indicating the country's deepening dependence on multilateral and bilateral creditors.
The $26.7 billion disbursed during the fiscal year 2024-25 was slightly higher than the preceding fiscal year, according to data compiled by the Ministry of Economic Affairs, the State Bank of Pakistan (SBP), and the Ministry of Finance.
Of the $26.7 billion in foreign loans, only $3.4 billion or nearly 13% was received for project financing, official details released by the Ministry of Economic Affairs on Tuesday revealed.
Such low receipts for project financing underscore the difficulties in repaying the loans, as most foreign borrowings are used for budgetary support and to build foreign exchange reserves, neither of which generate revenues for repayment.
The central bank's gross foreign exchange reserves of $14.5 billion as of end-June are largely the result of rollovers, refinancing of existing loans, and some fresh borrowing. This highlights Pakistan's growing reliance on foreign creditors, making economic stability increasingly vulnerable.
According to the details, the Ministry of Economic Affairs booked $11.9 billion on the federal government's accounts, about $1.2 billion higher than the previous fiscal year. The International Monetary Fund (IMF) disbursed $2.1 billion, while another $12.7 billion came as rollovers of cash deposits from Saudi Arabia, China, the United Arab Emirates, and Kuwait.
Saudi Arabia has placed $5 billion in cash deposits with Pakistan's central bank, charging a 4% interest on the loans. The amount is rolled over annually as Islamabad remains unable to repay. Interestingly, the IMF's three-year programme is predicated on the continued rollover of these $12.7 billion loans, casting doubt on the depth of external sector stability.
China has placed $4 billion in cash deposits, charging over 6% in interest. The UAE has deposited $3 billion with the central bank.
China also disbursed $484 million in guaranteed loans in the last fiscal year, used primarily for asset purchases.
Pakistan failed to tap international capital markets last fiscal year and its planned $1 billion borrowing through Eurobonds and Panda bonds did not materialise. Instead, the government and central bank secured an expensive foreign commercial loan, backed by multilateral guarantees, to bridge the gap.
With Pakistan's credit rating in junk status, the country remains locked out of global capital markets and must pay high interest rates on commercial loans and cash deposits.
The finance ministry managed to secure $4.3 billion in commercial loans, mostly refinanced Chinese loans and others backed by guarantees from the Asian Development Bank (ADB).
The ADB disbursed $2.1 billion in new loans, $500 million more than budgeted. Multilateral institutions contributed $6.9 billion overall, including $2.1 billion from the IMF.
The World Bank released $1.7 billion, $300 million short of the budgeted amount, and has not announced any new budget support loan for the current fiscal year.
The Islamic Development Bank disbursed $716 million, and Saudi Arabia gave $200 million under an oil financing facility secured at 6% interest, making it an expensive loan.
Pakistan's debt-to-GDP ratio and gross financing needs-to-GDP ratio currently exceed sustainable levels, according to the Ministry of Finance. A gross financing need exceeding 15% of GDP is considered unsustainable. The Ministry of Finance's previous projections suggest Pakistan will remain above that threshold for at least the next three years.
In its first review of the $7 billion programme, the IMF flagged several risks to consistent policy implementation including the resistance to reforms, underperformance of tax revenue, high gross financing needs, low gross reserves, and a sizeable net foreign exchange derivative position of the SBP. It also warned that socio-political tensions could erode repayment capacity and debt sustainability.
For three fiscal years, FY2025-26 to FY2027-28, the IMF has projected Pakistan's gross external financing requirements at $70.5 billion. These figures may vary depending on changes in the current account deficit, remittance flows, and exports.
The IMF further stated that the overall risk of sovereign stress remains high, reflecting a high level of vulnerability to elevated debt levels, large gross financing needs, and low reserve buffers. However, the government has assured the IMF that it is closely monitoring debt vulnerabilities arising from elevated gross financing requirements and a significant sovereign-bank nexus.
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Express Tribune
5 hours ago
- Express Tribune
Dar touts inflation dip, better global relations
Listen to article Deputy Prime Minister and Foreign Minister Ishaq Dar said Pakistan has emerged from diplomatic isolation and is witnessing economic recovery, highlighting a sharp drop in inflation and growing international engagement. Speaking to the Pakistani community at the Consulate General in New York on Saturday, Dar said, 'We have made considerable progress, especially in political and economic fields, in the past three years, despite heavy odds – we are indeed a resilient nation.' Dar, who returned earlier in the day from Washington, said his meeting with US Secretary of State Marco Rubio was held in a cordial atmosphere and covered key global and regional matters. 'The meeting went very well,' he said, expressing hope for stronger bilateral ties. Present at the event were Pakistan's Ambassador to the United States Rizwan Saeed Sheikh, Permanent Representative to the UN Ambassador Asim Iftikhar Ahmad, and Consul General Aamir Ahmed Atozai. Dar told the audience that Pakistan was no longer isolated and now enjoys support from many nations, evidenced by recent high-level meetings with officials from China, the US, and others. He pointed to the reduction of inflation from 40% to 2.4% as of January 2025 as proof of government effectiveness. The DPM/FM said investor confidence had returned following the successful conclusion of the IMF programme, a recovery acknowledged by international credit agencies. He reaffirmed the government's ambition to join the G20. Dar credited PML-N leader Nawaz Sharif for steering the federal and Punjab governments, calling him an able statesman. He also briefed the community on the Special Investment Facilitation Council (SIFC), which aims to ease investment in key sectors. He announced that work was under way to resume PIA flights to New York, following the restoration of routes to Europe and the UK. Appreciating the Pakistani-American community's role, Dar acknowledged their contributions to Pakistan and the US, praising their unity during past tensions with India. He recounted the shooting down of six Indian aircraft by the Pakistan Air Force and praised the leadership of Chief of Army Staff Field Marshal Syed Asim Munir. Dar noted Pakistan's presidency of the UN Security Council—secured with support from 182 countries—and the unanimous adoption of a Pakistan-sponsored resolution on peaceful settlement of disputes. He reaffirmed Pakistan's commitment to diplomacy, peaceful regional ties, and its outreach to Afghanistan for trade and rail connectivity, while expecting Afghan soil not to be used for terrorism. On Aafia Siddiqui's incarceration, he said efforts for her release were ongoing through diplomatic channels. Ambassador Sheikh also addressed the community, noting Pakistan's improved global image following the armed forces' role in national defence. He urged the diaspora to invest in Pakistan, saying a strong economy is vital for national security.
Business Recorder
9 hours ago
- Business Recorder
US business delegation to visit China, SCMP says
A high-level delegation from the US-China Business Council will visit China this week and is expected to meet senior Chinese officials, the South China Morning Post reported on Sunday, citing two sources familiar with the matter. US, China reach deal to ease export curbs Reuters could not immediately verify the report.
Express Tribune
10 hours ago
- Express Tribune
Reimagining Balochistan
For over a century, camel caravans laden with silk, jade, porcelain, and spices traversed the expansive deserts of China's far-western frontier. These caravans, carrying merchandise from China and Central Asia, endured a grueling journey, crisscrossing the formidable Pamir and Tianshan mountain ranges en route to Kashgar — an oasis town at the heart of the fabled Silk Road. As a vibrant kaleidoscope of civilisations, Kashgar flourished as a hub where goods, knowledge, and cultures not only met, but also mingled. However, Kashghar together with other ancient Silk Road towns gradually slipped into economic obscurity in the 15th century as the rise of maritime trade shifted global commerce from land to sea. While China's eastern coastal cities leapfrogged in development during the country's rise as a global manufacturing powerhouse, the Xinjiang Uyghur Autonomous region — home to the predominantly Muslim ethnic Turkic community — was left behind. By the mid-20th century, Xinjiang had become increasingly volatile. The region was wracked by what Beijing calls the 'three evils' -- terrorism, separatism, and religious extremism as sporadic separatist, ethnic, and religious violence turned it into a restive borderland. Today however, that image is undergoing a sea change. The Chinese government has initiated an ambitious plan to restore Xinjiang's old glory not by resurrecting its past, but by reimagining its future as a renovated bridge between East and West. And to achieve this reality, Beijing introduced a novel 'Root Cause' model to address the underlying socioeconomic drivers of violence by focusing on economic empowerment, infrastructure expansion, cultural integration, and good governance in an attempt to weave Xinjiang back into the fabric of national progress by transforming it into a vital trade corridor. Senator Mushahid Hussain Sayed says China's Xinjiang strategy was extremely well thought out and well planned that involved a holistic approach. 'They (Chinese) are very clear that terrorists are not born, they are a product of circumstances. It's about changing mindsets. It's not just about the use of kinetic force or military force to browbeat extremists or terrorists. It's all about giving them a better alternative, a better option for the future, a hope for a better tomorrow through education and economic inclusion. Above all, they also incorporated deradicalization as a key component of their counter-terrorism strategy.' This strategy has five key elements. First, it employs advanced surveillance and intelligence technologies to monitor and deter extremism and terrorism. Second, it uses a rule-of-law approach with minimal force—arresting and prosecuting extremists in court, while avoiding extrajudicial actions. Third, the state adopts a holistic, system-wide approach involving over a million Communist Party of China cadres, teachers, and 28,000 religious clerics to implement and support stability efforts at the grassroots level. Fourth, China pursues inclusive economic development, offering education, jobs, and business opportunities to reduce alienation and integrate disillusioned people into society. Lastly, it coordinates with neighbouring countries to eliminate external terrorist threats, including the extradition or elimination of East Turkistan Islamic Movement (ETIM) leaders. Beijing's efforts are beginning to bear fruit. Xinjiang's GDP has doubled, and incidents of terrorist violence have dropped to zero over the past decade. The region has also become a key node in China's massive Belt and Road Initiative (BRI). Xinjiang's foreign trade reached $31.7 billion in the first five months of 2025, marking a whopping 22.9% increase over the same period last year, according to the data from Urumqi Customs. This growth outpaced the national average by 20.4%, with trade volumes already exceeding the first-half performance of 2024. Once impoverished, cities like Kashgar, Horgos, and Urumqi are now at the forefront of regional economic growth. Kashgar — a dirt-poor outpost — is now home to a bustling Free Trade Zone and stands as a cornerstone of China's westward economic ambitions. The China (Xinjiang) Pilot Free Trade Zone, divided into three core areas of Kashi, Horgos, and Urumqi generated nearly $14 billion in trade in just five months, accounting for 44% of Xinjiang's total foreign trade. Similarly, comprehensive bonded zones handled $11.42 billion in trade, representing 35.8% of the total. The trade boom is not state-driven alone. Private businesses contributed to 94.7% of Xinjiang's trade volume in the first five months of 2025, growing 25% year-on-year and accounting for 101.5% of trade expansion. The 'Root Cause' model identifies economic deprivation, ethnic alienation, and lack of opportunity as the main drivers of extremism and violence. Under this strategy, China launched a two-pronged campaign: a sweeping counterterrorism drive under the 2015 anti-terror law to mitigate the immediate threat; and a development push to ensure durable long-term peace. This approach is consistent with China's broader national philosophy of lifting people out of poverty to blunt the narrative of terrorists, extremists, and separatists. China has already pulled over 600 million people out of poverty within a few decades – an achievement acknowledged globally. A 2018 report by the Danish Institute for International Studies (DIIS) describes the strategy as a blend of hard security measures and economic transformation. 'This is not merely a counterinsurgency campaign,' the report notes, 'but a development-led pacification model aimed at engineering long-term stability through integration and inclusion.' Xinjiang's transformation is also being powered—literally—by its vast renewable energy potential. Once considered a barren, windswept wasteland, Xinjiang has become the key to China's West-to-East Power Transmission Project. Since 2010, Xinjiang has exported over 900 billion kilowatt-hours of electricity, with 30% sourced from renewable energy. Massive solar farms in Turpan and wind corridors in Hami are now generating green energy not just for Xinjiang, but for 22 provincial-level regions across China. These projects are not only central to China's carbon neutrality goals, but also employ tens of thousands of residents — offering alternative livelihoods and helping to reduce rural poverty. Alongside green development, infrastructure investment forms another important pillar of the Root Cause strategy. Over the past decade, Xinjiang has undergone a sweeping urban transformation, with more than 2.5 million new housing units replacing slums and traditional mud-brick homes with modern apartment complexes. Nowhere is this transformation more visible than in the ancient city of Kashi (Kashgar), where the Chinese government has splurged over $70 billion on redevelopment. Each morning, a ceremonial gate-opening — celebrating Uyghur history, culture, and identity — draws large crowds of tourists. The once-crumbling Grand Bazaar has been rebuilt and now bustles with traders selling traditional Uyghur handicrafts, textiles, spices, and souvenirs, preserving the city's cultural essence amid modernisation. Roads, railways, hospitals, and schools have been expanded across Xinjiang. High-speed rail now connects Urumqi with Lanzhou and other major cities, while highways and logistics parks in Horgos and Alashankou have turned the region into a land port to Central Asia and Europe. Meanwhile, Xinjiang's tourism sector has reawakened after a long hibernation. The region boasts over 2,000 historical and scenic sites, including UNESCO-recognised cities, the Taklamakan Desert, and parts of the ancient Silk Road. Domestic tourism has surged, injecting billions into the local economy. However, everyone doesn't look at Xinjiang's transformation through Beijing's lens. Human rights groups and Western nations have long alleged mass surveillance, forced assimilation, and violations of religious freedoms in Xinjiang. Analysts believe this is part of the West's psychological war against China's development for geopolitical objectives. 'I feel the Western and Indian propaganda against China and Xinjiang is baseless and not founded on facts or empirical evidence. It's based on geopolitics because they want an issue to beat China with. Sometimes it's Tibet, sometimes it's Xinjiang, sometimes it's Hong Kong, sometimes it's the environment, sometimes it's the South China Sea, sometimes it's the so-called debt trap for the BRI,' says Senator Mushahid. 'So, something or the other they have to find some nitpicking and faults with China because they see China as a geopolitical rival and as an adversary,' he adds. 'China unfortunately has been a victim of this propaganda and those who have killed millions of Muslims have the cheek and audacity to call out China on human rights of Muslims in China.' Mushahid claims there has been no attack on Uyghur culture or identity or demography, saying that the community enjoys cultural freedom, the highest population growth rate, and relatively better living standards, especially compared to Muslims in neighbouring countries, as Xinjiang borders eight countries, including five Muslim nations. SM Hali, who has authored several books on China, says the criticism of Xinjiang policy might have some substance, but many claims — like the mass illegal detentions, forced labour, cultural repression, and forced assimilation — are far from facts. Taking a potshot at Western media, he accused them of recycling Holocaust imagery to portray Chinese 're-education' centres which were set up to rehabilitate Uyghur people vulnerable to extremism through education and vocational training. Hali argues that Western nations impose a universalist framework, sidelining cultures and identities that fall outside their normative value system. 'Western framing often emphasises individual rights and liberal democratic norms which clash with China's state-centric model of governance,' he says. 'China has developed its own system of democracy, a system which is suited to its people, which may be different from the Westminster-style of democracy, which may be different from the US democratic norms, or the French, but if it works for China, who are we to contest that?' Xinjiang holds a strategic importance in China's broader geopolitical playbook. The region not only holds the country's deepest oil and gas reserves, but also sits at the gateway to Central Asia besides serving as a conduit for pipelines and fiber-optic links from Russia, Kazakhstan, Kyrgyzstan, and beyond. And to top it all, Xinjiang is central to China's western integration policy and its global connectivity under BRI. Can the Xinjiang model be applied to Balochistan? Xinjiang's dramatic transformation has caught the attention of some Pakistani analysts who argue that the 'Root Cause' model could possibly hold the remedy for the challenges facing Balochistan. They think Balochistan today mirrors the conditions Xinjiang faced prior to its overhaul -- a vast, resource-rich, and strategically important region held back by chronic underdevelopment, widespread alienation, bad governance, simmering discontent, separatist violence, and religious extremism. Pakistan, many of these experts believe, can adapt three strategic lessons from Xinjiang to catalyse peace and development in Balochistan. First, launch a youth-focused vocational renaissance by establishing community-led modern training institutes in key cities, offering market-relevant skills in mining, digital services, and agriculture. Second, make locals stakeholders in resource development by mandating local hiring, profit-sharing, and forming community oversight boards. Pair Baloch districts with others like Punjab for investment and mentorship. Third, reframe the national narrative by celebrating Baloch culture through media, education, and tourism. Promote inclusion, not suppression, to build dignity and identity. While Xinjiang trained over a million people and halved poverty, Balochistan suffers high unemployment and low GDP despite its resources. 'The lesson from Xinjiang isn't about control, it's about strategic inclusion. And Pakistan must shift from reactive security to proactive empowerment to turn Balochistan into a model of federal harmony and economic vitality,' says Hali. Hali contends that the development-first approach undeniably reshaped the region — and that Pakistan can draw on this model to craft a locally adapted, rights-respecting strategy for Balochistan. 'First of all, industrialization is a stabilizing force. We have to establish SCZs in Gwadar, in Hub, in Khuzdar with tax incentives. We have to provide land grants and simplified regulations to attract investment. Then there should be resource based industries; develop value-added industries around copper in Reko Diq, gold, fisheries and marble to retain the wealth locally.' When asked about the insurgency that threatens development and inclusion efforts, Hali contends that the development-first approach undeniably reshaped the region — and that Pakistan can draw on this model to craft a locally adapted, rights-respecting strategy for Balochistan. But he cautions that development alone cannot address the province's deeper sense of exclusion. 'Let me say it is no longer a question of poverty, but of perceived exclusion from decision-making, resource benefits, and national narratives. And economic inclusion, when applied, must not be invisible. Participate, participatory, and dignified — that means transparent governance.' Hali emphasised the need to involve tribal elders, youth leaders, and civil society in planning and oversight, adding that cultural respect must be upheld. 'We must celebrate Baloch identity through media, education, and tourism — not suppress it. And security must be built on trust. We must replace heavy-handed tactics with community policing and reconciliation efforts.' Senator Mushahid echoed similar concerns, particularly around accountability and justice. 'If I were asked to advise the government of Pakistan on the three things needed to resolve the issue in Balochistan, number one would be to remove this blot — this bleeding wound — of missing persons. I think this is a stain on the fair name of Pakistan. Our country is a product of democracy, the rule of law.' Pakistan, the senator reiterated, has much to learn from China in addressing unrest and promoting stability and harmony. Providing context, he traced the roots of the Baloch insurgency back to the government of former Prime Minister Zulfiqar Ali Bhutto, who, he said, dismissed Balochistan's first democratically elected government — an act that, in his view, triggered the insurgency. He credited General Zia ul Haq's period for being peaceful as the former military ruler offered respect to leaders from Balochistan. 'Pakistan's approach has to change,' he said. 'We need an effective counterterrorism strategy to confront the foreign-sponsored proxies and terrorists killing innocent people in Balochistan. Yes, there must be a kinetic component — but equally important are education, political engagement, and a softer touch.' He did not spare Balochistan's own elite either. 'They've been beneficiaries of the federal system, the 1973 Constitution, and the 18th Amendment, which has given the province significant financial autonomy. Yet they've done damn all for the people of Balochistan.' Reverting to a comparison between Xinjiang's trajectory and Beijing's approach with Islamabad's strategy in Balochistan, Mushahid credited Chinese policy for its strategic clarity and consistency — qualities he said have been lacking in Pakistan. 'That's why there's been a flip-flop approach, and the problem remains unresolved,' he concluded. From the looks of it, officials in Pakistan have increasingly emphasized the need for economic inclusion in Balochistan under CPEC, viewing it as a peace-building exercise, not just an infrastructure project. Xinjiang's journey from epicenter of terrorism to a burgeoning economic hub is neither complete nor uncontested. But the trajectory is undeniable. Trade, industry, infrastructure, and energy have returned life to cities once left behind by history. Whether or not the Root Cause model becomes a global template remains to be seen. But in the deserts of western China, a new Silk Road is being paved—not with camel caravans, but with economic integration, digital connectivity, and an unapologetically developmentalist vision of peace.
