Pakistan reserves, exports and investment inflows strengthen in fiscal first quarter

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Pakistan reserves and investment Q1

Highlights

State Bank of Pakistan foreign exchange reserves reach a record U.S.$21.5 billion, up 52 percent year-on-year, with total liquid reserves at U.S.$26.8 billion covering over three months of imports.
Net inflow of foreign investment totals U.S.$3.65 billion versus a net outflow of U.S.$33 million a year earlier, with foreign direct investment up 20 percent to U.S.$720 million and sovereign ratings upgraded by Moody’s and S&P.
Federal Board of Revenue tax collection rises seven percent year-on-year to Rs3.1 trillion, total government debt drops to Rs86 trillion, and 92 percent of retail payments occur digitally with 13.2 billion digital transactions.

Finance ministry scorecard highlights external sector gains

As reported by Brecorder, citing the Ministry of Finance’s Pakistan Macro, Reform and Investment Scorecard for July-September 2026, State Bank of Pakistan foreign exchange reserves surge 52 percent year-on-year to a record U.S.$21.5 billion, while foreign direct investment rises 20 percent to U.S.$720 million.

Total exports increase 11 percent to U.S.$11.2 billion, supported by an 18 percent rise in information technology and technology exports to U.S.$1.25 billion. Workers’ remittances grow 14 percent to U.S.$10.9 billion, while total liquid foreign exchange reserves reach U.S.$26.8 billion, equivalent to more than three months of import cover versus 2.2 months a year earlier.

The rupee appreciates 1.5 percent year-on-year, but the current account posts a deficit of U.S.$874 million during the quarter, compared with U.S.$755 million in the same period last year. The scorecard also shows a U.S.$3.65 billion net inflow of foreign investment, against a net outflow of U.S.$33 million a year earlier, with foreign private investment up 44 percent to U.S.$691 million and foreign public investment swinging to a U.S.$2.96 billion net inflow.

Pakistan’s sovereign ratings also improve during the period, with Moody’s upgrading the country to B3 from Caa1, S&P raising it to B from B-, and Fitch reaffirming B-. The country also reaches a staff-level agreement with the International Monetary Fund on the fourth review under the Extended Fund Facility and the third review under the Resilience and Sustainability Facility, which could unlock an additional U.S.$1.2 billion subject to IMF Executive Board approval.

Domestic financing, debt and digital activity expand

On the fiscal side, Federal Board of Revenue tax collection reaches Rs3.1 trillion in the first quarter, up seven percent year-on-year and above the quarterly target, while the number of income tax return filers rises 45 percent to 5.77 million. The policy rate remains at 11.5 percent through September, down from a peak of 22 percent in June 2024.

Total government debt stands at Rs86 trillion by August 2026, down Rs714 billion from June 2026, with domestic debt at Rs58.8 trillion and external debt stable at U.S.$98.2 billion. The debt-to-GDP ratio is reported at 68 percent in fiscal year 2026, compared with 75 percent in 2022-23, while large-scale manufacturing grows 1.85 percent year-on-year in July-August 2026 and automobile, petroleum, cement and fertiliser sales all increase.

Credit to the private sector reaches Rs11.28 trillion in September, up 16.6 percent year-on-year. Financing to small and medium enterprises climbs 66 percent to Rs1.14 trillion, housing finance rises 71.9 percent to Rs365 billion, and company incorporations increase 45 percent to 15,440, with 99.9 percent completed digitally.

The scorecard also points to continuing privatisation and digitalisation efforts. Due diligence is under way for proposed power distribution company privatisations, while digital payments account for 92 percent of retail payments by volume in fiscal year 2026, with 13.2 billion transactions and more than two million active digital merchants reported.

Our earlier report on Pakistan’s push to expand housing, agriculture and SME lending detailed the government’s targets to raise farm credit and SME financing to Rs1.5 trillion each by June 2027, alongside plans to speed up housing-loan processing under the Apna Ghar scheme. The piece also outlined proposed regulatory tweaks, risk-sharing arrangements and public-private partnerships intended to remove structural barriers and widen access to formal credit in priority sectors.

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