Farooq Awan

Pakistan’s currency is expected to undergo a gradual and controlled adjustment in fiscal year 2026 as external stability improves and economic activity strengthens, with the exchange rate projected to average PKR 282.8 per USD.

The currency remained largely stable during calendar year 2025, depreciating by only 0.59%. This stability was supported by strong remittance inflows, disciplined monetary management, and an improvement in foreign exchange reserves, which helped anchor market expectations and limit volatility.

The Pakistan Investment Strategy 2026, prepared by Arif Habib Limited, projects that the currency will enter a phase of measured adjustment in fiscal year 2026 as higher economic activity leads to increased import demand. The resulting pressure on the external account is expected to be gradual rather than disruptive.

The report available with Wealth Pakistan projects the exchange rate to average PKR 282.8 per USD in fiscal year 2026 and weaken further to PKR 292.3 per USD in fiscal year 2027. This implies an annual depreciation of around 3.3%, which the report describes as manageable and supportive of external competitiveness.

Foreign exchange reserves are expected to play a key role in maintaining stability. According to the document available with WealthPakistan, Arif Habib Limited estimates that the State Bank of Pakistan’s reserves will reach USD 17 billion by June 2026.

The reserve build-up is expected to be supported by a combination of external inflows. These include disbursements under international financial programs, funding from multilateral partners, bilateral inflows, and market-based financing through international bonds or Islamic financing instruments. In addition, rollover of external deposits and loans from friendly countries is expected to provide a significant buffer.

Pakistan’s external debt servicing obligations for the year stand at USD 25.8 billion. This includes USD 21.4 billion in principal repayments and USD 4.0 billion in interest payments. Of the total amount, USD 4.4 billion has already been repaid, while rollovers of around USD 5.3 billion have been secured. Of the remaining obligations, approximately USD 9.3 billion is expected to be rolled over.

Arif Habib Limited notes Pakistan continues to meet all external debt servicing obligations on time, which has helped strengthen confidence in the country’s external position. The report also notes that a gradual currency adjustment is expected to support exports without creating instability in domestic markets. The absence of sharp exchange rate movements is viewed as important for maintaining inflation control and preserving investor confidence.

Credit: INP-WealthPk