Ayesha Saba

Pakistan’s development portfolio continues to draw substantial external financing support, with 86 foreign-funded projects currently under implementation at a total foreign cost of Rs4.2 trillion, reflecting strong engagement with multilateral and bilateral development partners.

According to the Monthly Development Update (February 2026) issued by the Economic Policy Wing of the Ministry of Planning, Development and Special Initiatives, the Public Sector Development Programme (PSDP) includes 15 fully foreign-funded projects, while 61 schemes are being executed through a combination of external assistance and local counterpart funding.

For FY2025-26, a rupee cover of Rs229 billion has been allocated for these projects to ensure the timely implementation of foreign-assisted initiatives. The Planning Ministry authorizes one-line releases to sponsoring ministries and divisions in line with quarterly ceilings set by the Finance Division, enabling smoother disbursement of funds.

The report notes that ministries and divisions have so far sanctioned Rs54.9 billion under the foreign-funded portfolio, while actual expenditure has reached Rs30.6 billion, according to SAP records. These figures reflect ongoing progress in project execution and utilization of allocated resources.

Multilateral institutions remain the primary sources of development financing. The World Bank recorded the largest releases during Jul–Jan FY2025-26 at Rs24.73 billion, followed by the Asian Development Bank (ADB) with Rs19.13 billion. Funding from multiple donors contributed Rs4.30 billion, while Korea, the United States and other partners also supported various initiatives.

In terms of expenditures, the World Bank again led with Rs12.71 billion utilized, followed by the ADB at Rs7.89 billion. Additional spending was recorded through multiple donors, Korea, the United States, France and China, demonstrating diversified international support for Pakistan’s development agenda.

Foreign-funded projects typically cover a wide range of sectors, including infrastructure, energy, water resources, social services and institutional strengthening. Such financing provides both capital and technical expertise, supporting the execution of large-scale projects that may otherwise face domestic resource constraints.

The Planning Commission’s framework ensures that ministries have the flexibility to release and sanction funds for both foreign aid and local components based on project requirements. This approach aims to maintain steady implementation while adhering to budgetary controls.

External development assistance plays a key role in complementing domestic resources, enabling the government to pursue strategic initiatives aligned with national priorities. Partner-supported projects often focus on long-term improvements in connectivity, public services and economic resilience.

The report underscores that effective coordination between development partners and local authorities remains essential for maximizing the impact of foreign financing. Timely releases, proper monitoring and efficient utilization of funds help ensure that projects deliver intended outcomes.

With Rs4.2 trillion in foreign-assisted schemes in progress and billions already sanctioned and spent, external financing remains an important pillar of Pakistan’s development efforts during FY2025-26.

Credit: INP-WealthPk