The State Bank of Pakistan (SBP) expects the country’s foreign exchange reserves to increase to $23 billion by December 2026 and reach $25 billion by June 2027, compared with approximately $21.5 billion currently, as the central bank seeks to strengthen Pakistan’s external position and maintain economic stability. SBP Governor Jameel Ahmad shared the projections on October 26, 2026, during a press conference following the Monetary Policy Committee’s decision to raise the policy rate by 50 basis points to 12%. The reserve targets indicate that the central bank expects to continue building its foreign currency holdings over the coming months despite external debt repayment obligations and uncertainty in international energy markets. The governor also emphasised that maintaining the momentum in reserve accumulation would remain important for protecting economic stability and supporting confidence in Pakistan’s external financial position.
Governor Ahmad highlighted the scale of the recovery in foreign exchange reserves over the past three years, recalling that the country’s reserves had fallen below $3 billion in February 2023. The subsequent improvement has largely been supported by dollar purchases from the foreign exchange market rather than an increase in borrowing, according to the governor. He also noted that Pakistan’s external debt had increased by only around $5 billion to $6 billion over the preceding four years. This distinction is significant because reserve accumulation supported by market purchases can strengthen the external position without relying entirely on additional external liabilities. However, sustaining the current level of reserves and achieving the projected targets will require continued foreign currency inflows, careful management of external payments and favourable developments in the country’s balance of payments.
The central bank’s reserve projections come alongside a shift in monetary policy as inflationary pressures have increased. The latest 50-basis-point increase represents the SBP’s second policy rate hike in 2026, following a 100-basis-point increase in April that raised the rate to 11.5%. The central bank subsequently maintained the rate at its June, July and September meetings before raising it to 12% in October. The latest decision reflects concerns about rising inflation and the potential effects of higher international energy prices on domestic prices and economic activity. Higher interest rates can help contain inflationary pressures by influencing borrowing, spending and demand, although their broader effects depend on economic conditions and the pace at which prices respond. The SBP’s simultaneous focus on reserve accumulation and inflation management reflects the need to maintain external stability while addressing domestic economic pressures.
Pakistan’s economic growth outlook remains within the central bank’s projected range of 3.5% to 4.5% for the fiscal year 2026-27. Governor Ahmad said agricultural performance was expected to improve overall, supported by a more favourable outlook for sugarcane, rice and maize production. The outlook for cotton, however, was weaker. Agricultural output remains an important factor in Pakistan’s broader economic performance because it affects rural incomes, industrial raw material availability, food supplies and demand across related sectors. Better-than-expected performance in major crops could support economic activity and help strengthen domestic supply conditions. Nevertheless, the mixed outlook across different crops means that the overall contribution of agriculture will depend on actual production results and developments during the remainder of the fiscal year.
The governor also pointed to improvements in fiscal buffers, suggesting that the government’s financial position had strengthened in some respects. Fiscal conditions are relevant to the external outlook because government financing requirements, public expenditure and revenue performance can influence borrowing needs and broader macroeconomic stability. Stronger fiscal buffers may provide additional room to manage economic pressures, although sustained improvement depends on revenue collection, expenditure management and the government’s ability to meet its financing obligations. Alongside the reserve targets, the comments indicate that the SBP is assessing Pakistan’s economic position through several interconnected indicators, including external liquidity, inflation, agricultural performance and fiscal conditions. The extent to which these developments reinforce one another will influence the sustainability of the current recovery.
Market expectations had largely anticipated the October policy rate increase. According to a Mettis Global survey of market participants, 44.4% of respondents expected the SBP to raise the policy rate by 50 basis points, making it the most common forecast ahead of the announcement. Overall, 58.7% of participants expected an increase, while 41.3% anticipated no change. The final decision therefore aligned with the most widely held individual expectation, although a substantial share of respondents had expected the central bank to maintain the existing rate. The outcome also reflected the policy challenge facing the SBP as it responds to inflation without unnecessarily weakening economic growth.
Achieving foreign exchange reserves of $25 billion by June 2027 will depend on the balance between incoming foreign currency and Pakistan’s external financing requirements. Market-based dollar purchases, export receipts, remittances, investment inflows and external financing can contribute to reserve accumulation, while debt repayments and imports create demands for foreign currency. The governor’s projections establish the central bank’s expected trajectory, but the final outcome will depend on how these factors develop over the coming months. Pakistan’s reserves have recovered considerably from the low levels recorded in early 2023, according to the SBP’s account, yet maintaining that progress will require continued attention to external payments and financing arrangements. The central bank’s latest outlook places reserve accumulation alongside monetary tightening and economic recovery as key priorities for the remainder of FY27.
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