Pakistan reserves could plunge to $1.6B

Pakistan’s reserve story is suddenly about oil. Not just budgets or IMF paperwork — oil. A new Oxford Economics scenario says Pakistan’s foreign-exchange buffers could collapse from a recent recovery back toward crisis territory if the Middle East shock keeps energy prices high. That matters because reserves are the cash cushion that pays for imports, calms markets, and keeps a country from scrambling for emergency dollars. ### What is the actual warning? The headline number comes from Oxford Economics. In its updated scenario, Pakistan’s reserves fall to $6.8 billion by the end of 2026 and then toward $1.6 billion by fiscal 2028 if higher fuel costs stick and the country’s import and remittance patterns do not adjust enough. That forecast was cited in fresh coverage this week as the Middle East war keeps spilling into energy markets. ### Why does oil hit Pakistan so hard? Pakistan is unusually exposed because it imports a big share of the energy it uses. When crude, gas, freight, and insurance costs jump, the country has to spend more dollars just to keep fuel flowing. That widens the import bill, puts pressure on the current account, and eats into reserves 2026 pushed Brent above $100 and raised gas and shipping costs across the region. ### Why are reserves such a big deal? Reserves are what let the central bank cover imports, service external debt, and reassure lenders that the country can meet near-term obligations. If that cushion gets too thin, every outside payment becomes more stressful. Pakistan’s finance minister said in mid-April that reserves were around 2.8 months of import cover and that maintaining at least that level was important for macro stability. ### But weren’t Pakistan’s reserves improving? Yes — and that is the catch. Official data showed Pakistan’s total liquid foreign reserves at about $21.27 billion for the week ended April 24, 2026, with State Bank reserves at $15.83 billion after a recent rise. So this is not a story about reserves already being at $1.6 billion. It is a stress-case warning about how quickly a recovery can reverse if the energy shock lasts. ### What assumptions make the forecast so ugly? The forecast assumes oil averages $113 a barrel in the second quarter of 2026 before easing to $79 by year-end. Even with that later cooling, the near-term hit is large enough to do damage if Pakistan does not sharply cut imports or get offsetting inflows. In other words, this is not “oil stays at panic levels forever.” It is “even a partial retreat may still leave a big hole.” ### What is Islamabad doing about it? The government has already been looking for backup financing. Muhammad Aurangzeb said Pakistan was exploring Eurobonds, sukuk, bilateral loans, commercial borrowing, and even strategic fuel reserves, while keeping open the possibility of discussing changes to the $7 billion IMF program risks. ### Why does this turn into politics fast? Because fuel is not an isolated price. It feeds transport, food, power, and household costs. Pakistan then faces two bad choices — pass higher prices to consumers and trigger anger, or subsidize fuel and blow out the budget. Either path can weaken the government just as it needs outside lenders to stay confident. ### Bottom line? The story is not that Pakistan has already run out of dollars. The story is that a fragile recovery is sitting on top of an energy import problem — and one long external shock could punch straight through it.