Development partners (facts for economy)- The Nation

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Like other developing countries around the globe, Pakistan also seeks to optimise a higher and impact-oriented investment rate in order to achieve higher and sustainable economic growth. In this regard, Pakistan’s development partners provide knowledge advisory and financial assistance to support the implementation of economic reforms that will spur sustainable economic growth. The incumbent federal government’s priority is to undertake development partners’ engagements around two key objectives: (i) achieve sustainable social and economic growth as envisioned in its development plans to reduce poverty and inequality, and to create equitable access to social services and create employment opportunities for the youth, and (ii) address the external and fiscal imbalances for enhanced macroeconomic stability.

The disbursement of Foreign Economic Assistance (FEA) remained significantly high during the financial year 2020-21 as compared with the last year. During the first 10 months of the financial year, for which data is available, 83.3 percent of the budgeted amount was disbursed while it was 57 percent in the comparable period of the previous year The largest sector in terms of disbursement were energy and power, 36 percent followed by transport and communication 21 percent, agriculture 8 percent, education 7 percent, health 6 percent and physical planning and housing at 5 percent. During 2020, the G20 countries together with the Paris Club creditors announced a Debt Service Suspension Initiative (DSSI) to provide much needed fiscal space to stressed countries in their fight against COVID-19. Pakistan also took advantage of the initiative, entering into negotiations with 21 creditor countries for debt suspension amounting to $ 1.7 billion. Pakistan quite successfully negotiated and subsequently concluded dent rescheduling agreements with 19 bilateral creditors, including members of the Paris Club. Pakistan thus benefitted from the temporary suspension of debt service to official bilateral creditors, which covered $ 2.5 billion falling due over May 2020-June 2021 .Of this $ 0.8 billion were related to the second round of the Debt Service Suspension Initiative covering January-June 2021 debt service.


During 2020-21, the International Monetary Fund (IMF) remained closely engaged with Pakistan supporting its stabilisation programme in the course of mitigating fiscal pressures being faced in tackling the pandemic-related financing needs. The Fund accordingly approved disbursement of $1.4 billion under the Rapid Financing Instrument to mitigate the economic impact of the COVID-19 shock. It also provided $500 million for budgetary support under the 29-month Extended Fund Facility (EFF) in April 2021. The World Bank, Asian Development Bank (ADB), the Asian Infrastructure Investment Bank (AIIB) and IsDB were the major multilateral development partners who have conducted important diagnostic studies as well as formulated well-aligned medium-term country partnership strategies. Developments in the Pakistan economy were also being closely monitored and rated by important rating agencies like Fitch, Moody’s and S & P which helped Pakistan in accessing capital markets.

According to information gathered from different official sources, WAPDA had also quite successfully priced an inaugural $500 million at 7.5 percent of 10 years in a green bond offering, marking the first ever corporate transaction and the first green bond from Pakistan. The proceeds of the transaction are going to be allocated to finance eligible green projects as defined in WAPDA’s newly-established Green Financing Framework. Support from development partners and international financial institutions is critical to implementing the federal government’s agenda for sustained and balanced development for the people. The aim and objective of seeking foreign or external financial assistance can be stated as “promoting economic and social development in the developing countries”. It can also be defined as “Administered transfer of resources from a donor country or international financial agency to the developing countries with a view to encourage economic growth”. Foreign aid can be in the form of money, goods or technical assistance and can also be between two (bilateral) or many (multilateral) countries/institutions.

Foreign aid is also looked for to meet both the economy’s balance of payments gap and investment gap .That is why project and technical assistance alone are not sufficient. External resources in general terms comprise Project Loans and Grants, Programme Loans and Other Loans. As per the information available from official sources, Pakistan is scheduled to receive Rs 2747791.647 million in varying forms of foreign assistance during financial year 2021-22 from donor countries and international financial institutions. During the financial year 2020-21, Pakistan was scheduled to receive foreign assistance to the extent of Rs 2222919.000 million against which it had received Rs 2286858.519 million. A more detailed account of development partners of Pakistan and projected foreign assistance from the donor countries and agencies during the current financial year 2021-22 will be presented at another time.


Muhammad Zahid Rifat