Pakistan's foreign exchange reserves rise to $18.4 billion, but IMF's optimistic outlook faces test amid escalating Middle East conflict

智通财经2026/07/28 17:36

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Pakistan achieved a balance of payments surplus of 1.8 billion USD in the 2025/26 fiscal year, less than half of the 3.7 billion USD surplus recorded in the previous fiscal year. The main reason was the current account shifting from a surplus of 1.8 billion USD to a slight deficit, while the financial account surplus remained largely unchanged at 1.2 billion USD.
In the fourth quarter, after the outbreak of war in the Middle East at the end of February, the balance of payments remained robust with a surplus of approximately 905 million USD, higher than the 365 million USD recorded in the third quarter. This was mainly supported by remittances increasing by more than 8% year-on-year, with a 7% rise in the fourth quarter, partially offsetting the surge in oil imports due to the war.
The goods trade deficit expanded nearly 25%, from 26.9 billion USD to 33.6 billion USD. Exports fell by about 5% while imports grew by over 9%, leading to a 36% jump in the fourth quarter trade deficit, directly reflecting the impact of higher crude oil and petroleum product import costs.
Foreign direct investment fell from 2.5 billion USD to 1.9 billion USD, a decline of 24%, reflecting the exit of foreign businesses over concerns about security and economic prospects. However, the government account saw a net inflow increase of 2.9 billion USD thanks to IMF loan support.
At the end of the year, foreign exchange reserves stood at 18.4 billion USD, enough to cover nearly three months' worth of imports, which is considered a safe level. Since nearing default in the 2022/23 fiscal year, reserves have increased by over 14 billion USD in total. The IMF's three-year Extended Fund Facility and previous arrangements provided loans exceeding 8 billion USD combined.
IMF forecasts for the 2026/27 fiscal year show the current account deficit will jump to over 4 billion USD, but financial account inflows are expected to rise by more than 3 billion USD, with reserves likely to increase by a further 3.4 billion USD to nearly 21 billion USD.
However, with recent escalation in US-Iran tensions, there are mounting risks of full-scale disruptions on the Strait of Hormuz and Red Sea shipping lanes. International oil prices may surge sharply, and with heightened global recession risks, the IMF’s optimistic outlook faces significant downside risks. Pakistani authorities must remain highly alert to the risk of surging import bills, falling remittances, and shrinking exports.

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智通财经•2026/08/15 14:11