Pakistan economy gets a stronger buffer, but oil is the stress point
Ahmad used meetings with global investors and rating agencies on the sidelines of the IMF-World Bank spring meetings to argue that Pakistan’s macroeconomic base has improved. According to details reported by Dawn, he said inflation averaged 5.7 percent in the first nine months of the current fiscal year, the current account remained in surplus and SBP-held reserves had risen to $16.4 billion, mainly through central bank purchases from the interbank market.
The $18 billion figure remains a June target rather than a guaranteed cushion already in hand. The SBP’s latest foreign exchange reserves table showed SBP-held reserves at $15.08 billion and total liquid foreign reserves at $20.52 billion as of April 10, underscoring how debt payments and inflows can quickly shift the reserve picture.
That distinction matters. Pakistan’s external position is better than it was three years ago, but the margin for policy error remains thin. A prolonged jump in oil and gas prices would feed into the trade deficit, fuel subsidies, electricity tariffs and inflation expectations, putting pressure back on the rupee and on the central bank’s ability to keep building reserves.
Iran war exposes Pakistan’s fuel and import vulnerabilities
The biggest near-term risk is energy. Pakistan imports nearly all of its oil, much of it through or near the Strait of Hormuz, and the conflict has already forced policymakers to look for alternative supply routes and fuel options. Petroleum Minister Ali Pervaiz Malik told Reuters that Pakistan was weighing spot LNG purchases after supply disruptions, while spot cargoes had surged to $20 to $30 per mmBtu.
Finance Minister Muhammad Aurangzeb has also framed the war as a reason to rethink Pakistan’s energy security strategy. In an interview with Reuters, he said “all options are on the table” for financing, including Eurobonds, Islamic sukuk, commercial loans and a planned Panda bond, while also calling for strategic petroleum reserves and a faster shift toward renewables.
The government is trying to balance three objectives at once: protect the poor from price shocks, avoid a renewed import squeeze and preserve the IMF-backed stabilization path. That balance becomes harder if energy costs remain elevated through the summer, when power demand rises and gas shortages can spill into industry and fertilizer production.
External financing remains central to the reserve story
Pakistan’s reserve outlook also depends on friendly financing and rollovers. Saudi Arabia has agreed to provide $3 billion in additional support and extend a $5 billion deposit arrangement, according to Reuters reporting on the Saudi backstop. The support comes as Pakistan faces a $3.5 billion repayment to the United Arab Emirates and tries to stay aligned with IMF reserve targets.
That makes the $18 billion target more than a confidence signal. It is a test of whether Pakistan can replace maturing bilateral support, keep official inflows moving and avoid burning reserves to defend the currency or subsidize energy prices. Investors will watch not only the headline reserve number but also how much of it is built from durable inflows rather than temporary deposits.
Older crises show why the $18bn target matters
The continuity is important. In February 2023, Pakistan’s central bank reserves fell to $3.09 billion, which analysts said covered less than three weeks of imports, according to Reuters coverage of the reserves collapse. That episode pushed the country close to default and forced painful measures, including a weaker rupee, higher fuel prices and renewed IMF negotiations.
The first turning point came later that year, when the IMF reached a staff-level agreement with Pakistan on a $3 billion stand-by arrangement. The second came in 2024, when the IMF approved a 37-month, $7 billion Extended Fund Facility designed to support macroeconomic stability, fiscal reforms and reserve rebuilding.
Those earlier episodes explain why the current shock is being judged through the reserve lens. Pakistan is not back at the edge of the 2023 crisis, but its recovery is still dependent on disciplined fiscal policy, timely external financing and a manageable energy bill.
What comes next for Pakistan economy
The immediate question is whether the Iran war remains a temporary price shock or becomes a longer disruption to energy flows. A shorter conflict would allow Pakistan to absorb higher fuel costs with limited damage, especially if remittances remain strong and promised inflows arrive on schedule.
A longer conflict would be harder. It could widen the current account gap, force new fuel-price adjustments, lift inflation and complicate monetary easing. It could also increase pressure for subsidies at the same time Islamabad is trying to show fiscal discipline under the IMF program.
For now, the SBP’s message is that the Pakistan economy has a stronger shield than it had during the last crisis. The Iran war will test how strong that shield really is.
