The State Bank of Pakistan (SBP) responded to this crisis by raising its key policy rate by 100 basis points to 11.5%. The SBP’s decision aims to protect reserves and prevent pressure on the rupee. The central bank acknowledges that inflation is expected to remain above its medium-term target range of 5-7% for much of the next fiscal year.

As a result of these developments, headline inflation rose to 7.3% in March 2026, with core inflation edging up to 7.8%. Prime Minister Shehbaz Sharif noted that the rising oil costs have complicated Pakistan’s macroeconomic outlook. He stated, “Our weekly pre-war oil bill was around $300 million, and today it is up to $800 million.” This dramatic increase underscores the severity of the situation.

The effects of this economic strain are widespread. Remittances play a crucial role in financing over 100% of Pakistan’s trade imbalance. However, recent events threaten this balance. Foreign exchange reserves have improved recently due to external financing inflows and debt rollovers, but uncertainties remain about their sustainability.

Experts warn that the ongoing Middle East conflict complicates efforts for economic recovery. The SBP governor described the rate hike as a “pre-emptive move” to contain second-round effects before they became entrenched. With rising inflation and increasing oil prices, Pakistan’s economy faces significant challenges ahead.

Pakistan has recently managed to pay back a $3.45 billion deposit to the UAE and received a $3 billion transfer from Saudi Arabia. These actions reflect ongoing efforts to stabilize foreign exchange reserves amid increasing pressure from external factors.

The situation remains precarious as officials continue to navigate these turbulent waters. Prime Minister Sharif mentioned that “the situation now appeared satisfactory,” but he also acknowledged that “with the war, our efforts of two years have witnessed a setback.” The path forward will require careful management of both domestic and international economic relations.

As inflation continues to rise and geopolitical tensions persist, Pakistan faces an uncertain economic future that will demand resilience and strategic planning.

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During the week ended April 24, SBP reserves rose by $730.3 million. This brought the total SBP reserves to $15.83 billion. The overall reserves of Pakistan also increased by $640.5 million, reaching $21.27 billion.

The increase represents a growth of 4.84 percent for SBP and 3.1 percent overall. This surge offers relief after several months of pressure on the external account.

Analysts view this development as a positive signal for Pakistan’s external finances. The influx of investment from the eurobond has contributed to improved financial stability.

Pakistan’s foreign exchange reserves have been under pressure for months prior to this increase. The recent rise is an encouraging sign for stakeholders and investors alike.

This boost in reserves may enhance confidence among international investors and aid in stabilizing the economy further.

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In February 2026, Pakistan reported a current account surplus of $427 million, a notable increase from a surplus of $68 million in January 2026. This marks a significant turnaround from the previous year, when the current account posted a deficit of $85 million in February 2025. The recent figures indicate a positive trend in the country’s external financial position, attributed largely to robust remittance inflows.

According to Khurram Schehzad, another financial analyst, “February’s current account surplus was the highest in one year and marks the second consecutive monthly surplus, signalling continued improvement in Pakistan’s external sector.” This improvement comes despite ongoing challenges, including a trade gap that remains elevated.

Pakistan’s overall economic landscape has been influenced by the significant role of remittances, which accounted for 55 percent of total inflows to the country. In fiscal year 2025, remittances reached a record $38.3 billion, reflecting a 26.6 percent increase compared to the previous year. The government projects that remittances could rise to approximately $42 billion in fiscal year 2026, further bolstering the economy.

The Roshan Digital Account platform, launched on September 10, 2020, has played a crucial role in facilitating these remittance inflows. By February 2026, more than 900,000 accounts had been opened under this scheme, with total inflows surpassing $12 billion. This initiative allows overseas Pakistanis to access banking and investment services, thereby enhancing their ability to contribute to the national economy.

As Muhammad Aurangzeb noted, “The diaspora—estimated at around 11 million people—continues to play a vital role in supporting the national economy.” The importance of these remittance inflows cannot be overstated, as they are essential for maintaining stability in the country’s external account and for supporting foreign exchange reserves.

Currently, the State Bank of Pakistan’s reserves stand at around $16.3 billion, with total national reserves estimated at $21.6 billion. However, despite the positive trends in the current account, Pakistan ran a deficit of $700 million in the first eight months of the fiscal year 2026, indicating that challenges remain.

As the country continues to navigate its economic landscape, the focus will likely remain on enhancing remittance inflows and leveraging platforms like the Roshan Digital Account to support financial stability and growth. The upcoming months will be critical in determining whether these positive trends can be sustained.

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The State Bank of Pakistan’s foreign currency reserves rose by $87 million, reaching a total of $16.3 billion. This increase is notable given the ongoing disruptions in trade and financial links with the United Arab Emirates.

Despite the challenges posed by regional conflicts that have affected normal commercial activities, the rise in reserves reflects a positive trend in the country’s financial stability. The total liquid reserves held by the State Bank of Pakistan now stand at approximately $21.43 billion.

Currency traders in Pakistan are actively working to restore financial and trade connections with Dubai, which have been impacted by recent events. The efforts to re-establish these links are crucial for maintaining economic stability and ensuring the flow of trade.

The increase in foreign exchange reserves is a significant development for the State Bank of Pakistan, as it demonstrates resilience in the face of external challenges. Observers are closely monitoring the situation to see how these efforts will unfold and whether they will lead to further increases in reserves.

Details remain unconfirmed regarding the specific factors contributing to this rise in reserves, but the overall trend is encouraging for the Pakistani economy. The State Bank’s ability to bolster its foreign currency reserves is essential for supporting the national currency and managing economic pressures.

As the situation evolves, stakeholders in the financial sector are hopeful that the restoration of trade links with the UAE will provide additional support to the economy, potentially leading to further improvements in foreign exchange reserves.

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