KP to receive Rs163.53bn foreign loan, Rs11.65bn grants in FY26

PESHAWAR: The Khyber Pakhtunkhwa (KP) government is set to receive a total of Rs177.18 billion in foreign assistance during the financial year 2025-26, according to official budget documents.

The amount includes Rs165.53 billion in loans and Rs11.65 billion in grants, to be utilised across 49 development schemes. The funds will be provided by 12 international donors, including both multilateral financial institutions and bilateral development partners.

The World Bank will be the largest contributor, offering Rs81.41 billion in loans for 12 schemes, accounting for 45.95 per cent of the total foreign assistance. The Asian Development Bank (ADB) follows closely, with Rs72.08 billion in loans, supporting 14 projects. Its share in the total foreign aid stands at 40.68 per cent.

USAID (United States Agency for International Development) will provide Rs5.25 billion in grants for two projects, making it the top grant-based donor. Germany’s KfW will contribute Rs3.71 billion in grants to finance seven schemes, while KOICA (Korea International Cooperation Agency) will support one project through a grant of Rs1.4 billion.

The government of Japan will provide Rs1.02 billion in grants for two development schemes. The Saudi Fund for Development (SFD) will provide Rs2.24 billion in loans for two projects, while Italy will extend a loan of Rs3.92 billion for one scheme. The International Fund for Agricultural Development (IFAD) will provide Rs5.88 billion in loans, funding a single development project. China is also listed as a bilateral donor, contributing a grant of Rs262 million for one scheme.

The total foreign assistance -- comprising over 93 per cent loans and less than 7.0 per cent grants -- reflects KP’s continued reliance on external support to finance key sectors such as infrastructure, health, education, agriculture, and rural development.

While the inflow of funds is expected to boost development activities, the heavy dependence on loans has sparked debate over the province’s growing debt burden and future fiscal sustainability.