SBP sees current account deficit at up to 1% of GDP in FY27

July 27, 2026 (MLN): State Bank of Pakistan (SBP) Governor Jameel Ahmad projected a modest widening in Pakistan's external account during FY27, while expressing confidence that foreign exchange reserves, remittances, and exports will continue to improve despite an uncertain global environment.

Addressing a post-monetary policy press conference on Monday, the governor said the current account is expected to post a deficit of 0-1% of GDP in FY27, compared with a near-balanced external position in FY26, when the country recorded a current account deficit of around $149 million.

Furthermore, Pakistan’s FY27 GDP growth is projected at 3.5%–4.5%, while SBP expects inflation to gradually ease and stabilize near the upper end of the 5%–7% target range by June 2027 on higher global commodity prices and food costs.

He noted that the external account outlook remains contingent on international oil prices, with any significant increase in crude prices posing risks to the projected deficit.

Despite the anticipated rise in imports alongside stronger economic activity, Governor Jameel Ahmad said Pakistan's external buffers are expected to strengthen further.

The SBP projects foreign exchange reserves to reach $20.2 billion by December 2026, with reserves expected to continue increasing throughout FY27 despite prevailing geopolitical and global economic uncertainties.

The governor also forecast workers' remittances to climb to approximately $44 billion in FY27, providing a key source of support for the country's external account.

On exports, Governor Jameel Ahmad acknowledged that Pakistan's export sector faced pressure during FY26, but said performance is expected to improve in FY27.

He attributed the expected recovery to higher rice exports and government measures aimed at supporting exporters, while cautioning that the improvement would likely be gradual rather than dramatic.

"There will be improvement, although it may not be very significant," he indicated.

The governor further said inflows under the Roshan Digital Account (RDA) initiative are also expected to increase, providing additional support to Pakistan's balance of payments.

Although imports are projected to rise in line with improving domestic demand, he emphasized that stronger remittances, exports, and RDA inflows would help ensure a continued build-up in foreign exchange reserves.

Debt servicing burden to ease

Commenting on Pakistan's external debt obligations, Governor Jameel Ahmad said the country's gross external debt servicing stood at approximately $26.5 billion in FY26, of which around $22.5 billion represented principal repayments, while the remainder comprised interest payments.

For FY27, the SBP expects total external debt servicing requirements to decline to around $21.5 billion, including approximately $3.5 billion in interest payments.

He noted that a substantial portion of principal repayments will be met through the rollover of bilateral obligations and the refinancing of commercial bank loans.

As a result, Pakistan's actual net external repayment requirement will be limited to around $7 billion during FY27.

According to the governor, the decline in debt servicing obligations reflects lower financing costs and the government's strategy of replacing relatively expensive short-term commercial borrowing with longer-term financing, leading to an improvement in the country's overall external debt profile.

SBP forward liabilities decline

The governor said SBP’s forward liabilities have declined from $5.5 billion to around $5 billion, with only around $900 million remaining, further strengthening the external position.

He said Pakistan’s objective is to gradually move away from being a borrower in international markets and eventually become a net lender.

The governor highlighted that improvements in Pakistan’s external position have already started reflecting in international market sentiment.

He noted that S&P upgraded Pakistan’s sovereign rating International bond and Sukuk yields improved significantly.

The governor recalled that Pakistan’s 10-year Sukuk was trading around 33.1% in December, whereas it has now declined to around 7.7%, reflecting improved investor confidence and reduced risk perception.

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