SBP projects Pakistan FX reserves to hit $21.1bn by end of FY27

The State Bank of Pakistan (SBP) has presented a promising outlook for the domestic economy, projecting the country’s foreign exchange reserves (held by the central bank) will hit a new high of $21.1 billion by the end of current fiscal year FY27.

In its biannual Monetary Policy Report (MPR) released on Monday, the central bank, however, highlighted at least four key threats to the positive outlook including volatile global commodity prices amidst evolving geopolitical situation.

The other risk factors to the economy included delays in the implementation of structural reforms, challenging environment for exports amidst global tariff uncertainty, and climate-related risks, particularly emanating from El Niño conditions.

The report said the inflows of workers’ remittances and exports of goods and services were expected to pick up in FY27.

“This, together with the realisation of planned official inflows, is expected to increase SBP’s FX reserves to the targeted $20.20 billion by end of December 2026. The FX reserves are projected to improve further [to $21.1 billion] by June 2027.”

The central bank estimated the economic growth in range of 3.5-4.5% for FY27 compared to provisional 3.7% for FY26. The bank said the growth number for the preceding year would improve to around 4% when it is finalised in the near future.

The MPR further said Pakistan’s macroeconomic outlook for FY27 had improved relative to the Monetary Policy Committee’s (MPC) earlier assessment immediately following the outbreak of the Middle East conflict.

“Inflation is projected to be lower than previously anticipated; economic activity is expected to recover gradually; and the external account pressures are assessed to remain moderate, with SBP’s FX reserves targeted to increase further.”

The continued implementation of prudent monetary and fiscal policies has improved the economy’s resilience to shocks relative to previous years, according to the central bank.

“Nonetheless, the baseline outlook remains subject to multiple evolving short- and medium-term risks, emanating from both external and domestic sources. In particular, uncertainty regarding the duration and intensity of the ongoing Middle East conflict, adverse climate events, global tariff policies, and delays in the implementation of structural reforms, are major risks that the MPC has evaluated in its recent macroeconomic assessment and policy settings.”

It further said SBP’s prudent monetary policy tightening was helping contain second-round effects of the energy price shock, while keeping inflation expectations of stakeholders broadly anchored.

“Meanwhile, the government passed on increases in global prices to domestic prices in a timely manner, and introduced temporary and targeted subsidies to support the most vulnerable population and business segments. The government also introduced austerity measures to conserve energy. These measures helped maintain fiscal discipline and moderate aggregate demand.

“Nonetheless, the global shock, coupled with the policy response, weakened the growth momentum that had been picking up pace before the outbreak of the Middle East conflict,” the report said.