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Atlantic Council report: Pakistan's development aid shifts to loans, financing could reach $17.2 billion by 2027
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An Atlantic Council report finds Pakistan's development assistance landscape is undergoing a major structural shift: Western bilateral aid is declining, multilateral development bank financing is rising to compensate, and non-Western bilateral and philanthropic flows are growing. The model is moving from grant-based Western aid toward loan-based multilateral and non-Western financing. Total development financing could reach $17.2 billion by 2027, but authors Leon Waskin and Imran Shauket warn the concessional-loan pool does not reach soft, non-revenue sectors such as girls' education, maternal and child health, and humanitarian support, where needs are most acute. They recommend Pakistan create a central donor coordination entity, invest in higher-return sectors to service debt, and convene a conference of traditional donors, UN agencies, foundations, and CSR-providing corporations to align funding with national priorities and eliminate duplication.
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Overview
Pakistan's development assistance landscape is undergoing a major structural shift. Western bilateral aid is declining, multilateral development bank (MDB) financing is increasing to compensate, and non-Western bilateral and philanthropic flows are growing steadily. The model is thus shifting decisively from grant-based Western aid toward loan-based multilateral and non-Western financing. Pakistan should treat this not as a crisis but as an opportunity to restructure how it receives and governs development assistance.
Total development financing could reach $17.2 billion by 2027, but a compositional challenge remains: the concessional-loan pool does not reach the "soft," non-revenue sectors—girls' education, maternal and child health, humanitarian support—in which needs are most acute.
Key Policy Steps
This new normal should prompt Pakistan to adapt a series of key policy steps.
- Create a central donor coordination entity. Pakistan should designate or create a central donor coordination entity to map the donor landscape, including donor contributions against Pakistan's sectoral priorities.
- Invest in high-return sectors. As official development assistance increasingly shifts to loans rather than bilateral grant funding, Pakistan cannot increasingly burden itself with debt without generating income and increasing its foreign currency inflow. Hence, Pakistan needs to identify and invest in sectors with a higher rate of return. Infrastructure alone does not create prosperity; rather, productive, healthy, and skilled people transform infrastructure into economic output.
- Convene a conference of potential funding sources. Pakistan should convene a conference of potential funding sources—traditional donors and UN agencies alongside Western foundations, Islamic foundations, and corporate social responsibility (CSR)-providing corporations. Its objectives should be to:
- Assess each donor's contribution to Pakistan's long-term goals
- Flag underfunded "soft" sectors such as girls' education and maternal health
- Eliminate duplication
- Ensure the overall portfolio reflects Pakistan's priorities rather than those of donors
Conclusion
Ultimately, Pakistan does not lack for funding. Its 2026–27 trajectory will be defined not by the volume of assistance available but by how efficiently it manages—on its own terms—a multichannel portfolio balancing hard-infrastructure loans with domestic-led social grants.
About the Authors
Leon "Skip" Waskin is a nonresident senior fellow focused on South Asia at the Atlantic Council. He previously was DevTech's senior executive director for operations. Before DevTech, Skip was the coordinator for economic and development assistance at the US Embassy in Islamabad, where he worked to ensure that assistance from the United States supported US national interests and contributed effectively to Pakistan's long-term stability, prosperity, and growth.
Imran Shauket is a senior adviser on South Asia at the Atlantic Council's Middle East Programs. He is also a consultant advisor to the Gates Foundation and founder of JOBS Group, an association of myriad entities sharing the common goal of economic empowerment and poverty alleviation.
Related Reading
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- [Dispatches | Oct 7, 2026] South Asian governments should look east for opportunities for young workers — By Imran Shauket. As Japan, South Korea, and increasingly Thailand slide toward super-aged societies, Pakistan and Bangladesh have something they need: young people. (Tags: Resilience & Society, South Asia)
- [Dispatches | Aug 7, 2026] Why Saudi Arabia, Pakistan, and Turkey just signed a defense pact — By Atlantic Council experts. Each country pledged to defend the others, but each country also has its own motivations for joining the pact. (Tags: Conflict, Iran)
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Image: A car driving in Pakistan. Jalal Ajmal via Unsplash
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