Pakistan’s Trade Deficit: As SBP Reserves Inch Toward $17.2 Billion, Currency Expert Atif Ahmed Warns The Managed Exchange Rate “May Burst After June” When Large External Payments Fall Due Before Fiscal Year-End On June 30
According to Dawn, the State Bank of Pakistan’s foreign exchange reserves rose by $43 million to $17.2 billion in the week ending May 29, edging closer to its FY26 annual target of $18 billion. But financial experts warn the improvement is being undermined by a rapidly widening trade deficit that threatens both the exchange rate and the current account balance.
The trade deficit rose by 17.48 per cent to $34.76 billion in July-May 2025-26, up from $29.58 billion over the corresponding period last year; a rise of $5.18 billion. The import bill reached $62.66 billion, primarily driven by luxury items and foodgrain. Pakistan’s total foreign exchange reserves at the end of last month stood at $22.63 billion, including $5.44 billion held by commercial banks.
Financial experts warned that the current account, which had a surplus of $1.8 billion in FY25, is now heading toward an unexpected deficit in FY26. Currency expert Atif Ahmed noted that the SBP has been purchasing dollars from the inter-bank market to prop up reserves, but that the price mechanism in the banking market no longer functions independently; “the rate is determined by the central bank.” He warned the managed exchange rate “may burst after June” when large creditor payments fall due before fiscal year-end on June 30.
Remittances, $41 billion targeted in FY26 face a slowdown risk as more than 50% originate from the Middle East, a region currently destabilised by the Hormuz conflict.
To check out our previous coverage on Pakistan’s economy and the State Bank of Pakistan, read our articles here.
