The crackdown launched late last month against the smuggling of hard currencies out of Pakistan has checked speculative demand for dollars. However, the dollar shortage in the market appears to be driven primarily by imports and debt repayments, as evidenced by the decline in foreign exchange reserves and a significant rise in the merchandise import bill.

Pakistan’s total foreign exchange reserves fell to about $19.5 billion as of August 1 from $19.6bn a week earlier, according to the State Bank of Pakistan (SBP).

While the outflow of foreign exchange and the landing of goods do not happen simultaneously, it is worth noting that merchandise exports of the country consumed 29 per cent more foreign exchange in July this year than in the last year ($5.5bn vs $4.2bn), the latest update of the Pakistan Bureau of Statistics shows.

In a year marked by relentless global headwinds, Pakistan has achieved what few thought possible: a current account surplus. For a country long accustomed to haemorrhaging foreign exchange, the $2.1 billion surplus in FY25 feels almost surreal. Remittances have surged, IT exports held their ground, and imports were tightly leashed.

With annual debt repayments nearing $25bn and interest costs eating up a little less than half the total annual revenue, the fiscal space is suffocating

The current account surplus is not just a number........

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