The State Bank of Pakistan (SBP) expects its foreign exchange reserves to climb to $25 billion by June 2027, betting on continued dollar purchases in the domestic market to strengthen the country’s external position.
Governor Jameel Ahmed shared the projection on Monday, saying reserves are expected to reach $23 billion by December 2026 before rising further in the second half of the current fiscal year. Reserves stood at around $21.5 billion, with the latest weekly figure coming in just under $22 billion.
Ahmed said the improvement had largely come from buying dollars in the market rather than relying on fresh borrowing. He also pointed to Pakistan’s recovery from a difficult period in February 2023, when the central bank’s reserves fell below $3 billion.
He said keeping reserves on an upward path was important for economic stability. Over the past four years, external debt had increased by only $5 billion to $6 billion, he added.
The outlook comes as the central bank raised its policy rate by 50 basis points to 12% on Monday, citing persistent inflationary pressures and the risk of higher global commodity prices amid geopolitical tensions.
The increase followed a 100-basis-point hike in April, which took the rate to 11.5%. The SBP kept borrowing costs unchanged at its June, July and September meetings before tightening policy again.
Growth outlook remains intact
Despite the rate increase, the SBP expects Pakistan’s economy to grow by 3.5% to 4.5% in the current fiscal year.
Ahmed said the outlook for sugarcane, rice and maize crops had improved, while cotton production prospects were weaker. Agriculture as a whole, however, was expected to perform better.
He also noted an improvement in fiscal buffers, which could provide some support to the economy.
The latest monetary policy decision reflects the challenge facing policymakers: containing inflation without derailing the economic recovery. Higher interest rates can help cool demand and limit inflationary pressures, but they also raise borrowing costs for businesses and consumers.
Reserve target faces external risks
The $25 billion reserve target remains subject to risks from outside Pakistan. Elevated international commodity prices could increase the country’s import bill, while tighter global financial conditions and supply disruptions could put pressure on external balances.
For the SBP, the task is not just to build reserves but to sustain that growth while managing inflation and supporting economic activity.
The latest forecast suggests the central bank expects to continue strengthening its foreign exchange position over the coming months. Whether it reaches that goal will depend partly on domestic dollar inflows and how global economic conditions unfold.
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