The federal government has set the exchange rate at Rs290 to the US dollar for the upcoming fiscal year 2025–26, projecting a modest 3.6% depreciation. This projection reflects expectations of relative currency stability, largely due to continued support from the International Monetary Fund (IMF) and an improved external account position.
According to sources, the Ministry of Finance has directed all government departments to use this exchange rate while preparing their budget estimates for the next fiscal year. This rate will also be applied in calculating foreign procurement costs for defence, foreign debt servicing, allocations for overseas missions, and the Public Sector Development Programme (PSDP).
The government used the same Rs290 rate when preparing the current year’s budget, although the rupee has remained stronger than expected. The revised estimates for the outgoing fiscal year will now be based on an updated rate of Rs280 per dollar, closer to the interbank rate of Rs281.56 recorded on Monday.
Despite suggestions from the State Bank of Pakistan (SBP) that the rupee could fall to Rs299 per dollar next year, the Ministry of Finance chose to maintain the Rs290 assumption for budgeting purposes. Exporters have reportedly urged Prime Minister Shehbaz Sharif to further liberalize the exchange rate, but significant changes have yet to be announced.
The relatively low current account deficit—estimated at just 0.4% of GDP or under $2 billion—also supports a stable currency outlook. This manageable deficit is expected to be covered through steady foreign debt inflows. The IMF has projected foreign exchange reserves to rise to $17.7 billion by the end of FY26, equivalent to 2.8 months of import cover, slightly better than the current year.
Meanwhile, inflation is forecasted to average 7.7% in FY26, a target supported by the stable currency projection.
On the fiscal side, interest payments on external debt are expected to reach Rs1.2 trillion, with overall debt servicing projected at Rs8.7 trillion. This figure may be adjusted downwards if recent interest rate cuts are sustained.
Pakistan’s external debt stood at $130.3 billion by March 2025, marking a reduction of $800 million compared to a year ago. The decline reflects a decrease in long-term liabilities, aided by the SBP’s strategy of purchasing dollars from the local market rather than seeking fresh loans.
Nonetheless, Pakistan faces significant debt repayment challenges, with around $25 billion due in FY26. Of this, approximately $13 billion is typically rolled over by bilateral creditors. The government is currently assessing its total foreign financing requirements for the next fiscal year based on maturing debt and reserve-building needs.
Despite some improvements, Pakistan’s total debt and liabilities reached Rs89.8 trillion by March 2025, up 10.1% year-on-year. Government debt alone rose by 13%, reaching Rs73.7 trillion, according to SBP data.
