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Pakistan’s Reserves Rise by $23m, Signalling Steady Financial Recovery

Pakistan’s foreign exchange reserves continued their gradual upward trend this week, with the State Bank of Pakistan (SBP), the country’s central bank, reporting a $23 million increase for the week ended April 30, 2026. While the figure itself is modest, it reflects an incremental recovery that economists and policymakers have been closely tracking as Pakistan works to stabilise its external financial position.

Foreign exchange reserves, in the simplest terms, are the dollars and other foreign currencies that a country keeps in reserve. Think of them as the national savings account held in foreign money. These reserves are used to pay for imports, repay foreign loans, stabilise the national currency, and demonstrate to the rest of the world that a country can meet its financial obligations. When they rise, it signals strength. When they fall, alarm bells ring.

The Numbers at a Glance

The State Bank of Pakistan reported a $23 million increase in its foreign exchange reserves during the week ended April 30, 2026, which reached $15.85 billion. The country’s total liquid foreign reserves stood at $21.29 billion, of which commercial banks held net reserves of $5.44 billion.

The data also showed a slight increase in commercial banks’ reserves, which grew by $170,000 to reach $5.4428 billion. Overall, Pakistan’s total foreign exchange reserves recorded a combined increase of $24.5 million, bringing the national total to $21.2935 billion.

It is important to understand the difference between these two figures. The SBP’s reserves of $15.857 billion are the government-held reserves that are directly available for managing exchange rate pressures, paying sovereign debt, and financing critical imports.

The commercial banks’ reserves are separately managed and not directly deployable by the government in the same way. Together, the two pools form Pakistan’s total liquid foreign reserves.

What This Means for the Rupee

Alongside the reserves data, the currency market provided a broadly stable reading. The rupee saw a marginal gain of Rs 0.01 against the US dollar, closing at 278.71 in the interbank market against the previous close of 278.72.

A one-paisa movement is numerically negligible. But what it signals is arguably more important than the size of the shift: the rupee is not under fresh pressure. For a currency that spent years in near free-fall, losing more than half its value against the dollar between 2021 and 2023, a period of exchange rate stability is itself a meaningful development.

Stability in the rupee directly benefits ordinary Pakistanis, as it prevents further spikes in the prices of imported goods from fuel and edible oil to medicines and electronics.

The IMF Dimension: A Critical Near-Term Catalyst

The weekly reserve figure gains considerably more weight when placed in the context of an anticipated IMF disbursement that has been the focus of Pakistan’s financial managers and market observers alike.

The IMF Executive Board was scheduled to consider Pakistan’s Staff-Level Agreement on May 8, 2026. If approved, the country was expected to receive around $1.2 billion in fresh funding under its ongoing financial support programme.

The Ministry of Finance and the State Bank of Pakistan showed unanimous optimism over economic growth and achieving fiscal and current account targets, with the development coming amid anticipated approval of disbursements worth over $1.2 billion by the IMF.

SBP Governor Jameel Ahmad, testifying before the National Assembly’s Standing Committee, stated that the current fiscal year would end with foreign exchange reserves of $17 billion. The IMF staff mission was also expected to visit Islamabad on May 15 for finalisation of the next fiscal year (2026–27) budget in consultation with the Ministry of Finance, the SBP, the FBR, and the Power and Petroleum Divisions.

Taken together, these developments paint a picture of a government actively managing its external financing calendar and, for the moment, keeping pace with its obligations.

Gold Markets: A Parallel Development

The week’s financial news was not limited to reserves. Pakistan’s domestic gold market saw a sharp upward movement, closely tracking international price gains.

In the local market, the price of gold per tola jumped Rs7,800 to settle at Rs496,762, according to rates issued by the All-Pakistan Gems and Jewellers Sarafa Association.

Similarly, the price of 10-gram gold increased by Rs6,687 to Rs425,893. Internationally, spot gold gained 1% to $4,733.59 per ounce, after touching a two-week high earlier in the trading session.

The rally was driven by geopolitical factors: improving sentiment around a potential US-Iran diplomatic agreement eased fears of prolonged instability and lowered expectations of persistently high interest rates, both of which support investor appetite for gold.

Interactive Commodities Director Adnan Agar, commenting on the market, noted that gold had shown strong intraday volatility. He stated that for the bullish trend to continue, gold would need to cross and close above $4,875, with the next target at $4,850, followed by $4,900, and eventually the psychologically important $5,000 mark. He cautioned that if the market closed below $4,700, it would enter a dangerous zone where prices could decline towards $4,500.

Expert Analyst Perspectives – Cautious Optimism from Markets

Mohammad Sohail, CEO of Topline Securities, one of Pakistan’s leading brokerage firms, attributed the broader reserve improvement trend to a combination of policy actions and improving fundamentals.

He noted that the rise in foreign exchange reserves reflects improved external account management, higher remittances, better exports, and disciplined policy actions under the IMF’s guidance. He had also projected that reserves would surpass $17 billion by June 2026, citing strong remittances and a reduction in interest payments as key drivers.

Analysts at Arif Habib Limited provided a useful benchmark for measuring the practical impact of reserve movements. Following an earlier reserve jump triggered by an IMF disbursement, they calculated that the improvement in reserves had strengthened Pakistan’s external buffer, with import cover rising from 2.41 months a week earlier to 2.62 months, based on average imports of the last three months.

The number of months a country could theoretically continue importing without any new foreign inflows is a key health metric for any economy’s reserve position. Three months is the internationally recognised minimum safe threshold.

More broadly, market analysts pointed to the investment dimension of rising reserves. Analysts noted that stronger reserves reduce perceived risk, making Pakistan a relatively more attractive destination for portfolio and direct investments.

This shift could gradually ease borrowing costs and improve access to international capital markets. However, the same analysts added that confidence remains highly sensitive to policy consistency and global economic conditions.

A Dissenting, Structural View

Not all expert commentary has been optimistic. Dr. Raania Ahsan, a PhD economist and former Executive Director General at the Board of Investment in the Prime Minister’s Office, offered a sharper and more cautionary assessment in a widely-read analysis published in The Express Tribune in April 2026.

She argued that Pakistan’s external stability is measured more in optics than in underlying strength, warning that the country’s reserves are not entirely organic, being built on a combination of IMF disbursements, bilateral deposits, and administrative controls on imports and currency movement. In other words, they reflect managed stability, not deep structural health.

She flagged the reported repayment of billions to the UAE funds that had been rolled over annually as signalling the erosion of the assumed rollover comfort, noting that the transition from rollover to repayment fundamentally alters the external financing equation.

On the role of the IMF, Dr. Ahsan drew a critical distinction: stabilisation should not be mistaken for resolution. The IMF addresses liquidity issues. Pakistan’s challenge is one of structural solvency.

She concluded that Pakistan’s current external stability is sustained not by expansion but by compression through restricted imports, managed currency markets, and tight interest rates.

These measures have bought time but have not resolved the underlying imbalance between what the country earns and what it spends in foreign exchange. Exports remain narrow and insufficient.

A separate risk scenario, cited in regional financial coverage, added a sobering stress-test dimension: analysts noted that Pakistan has very limited room to absorb a fuel price hike because of its thin foreign exchange reserves, dependence on imported energy, and reliance on IMF-backed reforms, underscoring that the reserve cushion, while growing, remains sensitive to external commodity shocks.

Conclusion

Pakistan’s $23 million weekly increase in SBP foreign exchange reserves is, in isolation, a small number. But it belongs to a consistent pattern of week-on-week improvement that reflects a country working methodically to rebuild its financial resilience. The stability of the rupee, the improving reserve trajectory, and the anticipated IMF disbursement together paint a cautiously constructive picture.

Yet, as both market analysts and independent economists make clear, the headline reserve figure tells only part of the story. The reserves are still supported by external financing rather than export-driven organic growth, and the gap between managed stability and durable resilience remains real. The question Pakistan’s economy must ultimately answer, as Dr. Ahsan pointedly framed it, is not whether it can meet its next obligation, but whether it can build a system that stops depending on constantly preparing for the next one.

Citations

  1. Hanif, U. (2026, May 8). Foreign reserves rise by $23m. The Express Tribune. https://tribune.com.pk/story/2606902/foreign-reserves-rise-by-23m
  2. Pakistan’s foreign exchange reserves rise by $23 million in a week. (2026, May 7). Dunya News. https://dunyanews.tv/en/Business/950262-pakistans-foreign-exchange-reserves-rise-by-23-million-in-a-week
  3. Kiani, K. (2026, May 7). Finance ministry, SBP show optimism over economic growth amid expected $1.2bn tranche from IMF. Dawn. https://www.dawn.com/news/1998450
  4. SBP Reserves Increase By $730 Million Just Weeks Ahead of Next IMF Meeting. (2026, April 30). ProPakistani. https://propakistani.pk/2026/04/30/sbp-reserves-increase-by-730-million-just-weeks-ahead-of-next-imf-meeting/
  5. Pakistan’s Forex Reserves Rise by $730 Million Ahead of IMF Board Review. (2026, April 30). Bloom Pakistan. https://bloompakistan.com/pakistans-forex-reserves-rise-ahead-of-imf-review/
  6. Pakistan foreign exchange reserves jump sharply. (2026, April 30). Times of Islamabad. https://timesofislamabad.com/30-04-2026/pakistan-foreign-exchange-reserves-jump-sharply/
  7. Ahsan, R. (2026, April 20). Between reserves and reality: external sector under pressure. The Express Tribune. https://tribune.com.pk/story/2603647/between-reserves-and-reality-external-sector-under-pressure
  8. Pakistan’s foreign reserves reach $21.09b, boosted by IMF inflows. (2025, December 19). The Express Tribune. https://tribune.com.pk/story/2582945/import-cover-improves-to-262-months
  9. Pakistan exceeds IMF target as SBP reserves reach $14.5 billion. (2025, July 3). Geo.tv. https://www.geo.tv/latest/612144-pakistan-exceeds-imfs-target-with-sbps-reserves-reaching-145bn
  10. Pakistan reserves could plunge to $1.6 billion by 2028 over fuel shock: Report. (2026). ProKerala / South China Morning Post report. https://www.prokerala.com/news/articles/a1757934.html
CategoriesSpecial Report News Property Laws Property Taxes Real Estate Tax

Property Tax Section 7E Struck Down by Federal Constitutional Court

ISLAMABAD: In a landmark ruling that closes nearly four years of legal battles across Pakistan, the Federal Constitutional Court (FCC) has unanimously declared Section 7E of the Income Tax Ordinance, 2001, unconstitutional, wiping the controversial property tax off the books entirely and delivering a major blow to the Federal Board of Revenue (FBR).

Chief Justice Amin-ud-Din Khan, sitting alongside Justice Ali Baqar Najafi, delivered the short order in open court in Islamabad, marking one of the most significant tax rulings in Pakistan’s recent judicial history.

What Was Section 7E?

To understand why this ruling matters, you need to understand what Section 7E actually did and why so many people found it deeply unfair.

Section 7E was inserted into the Income Tax Ordinance through the Finance Act 2022. It introduced a “deemed income” tax on immovable property, essentially treating the value of real estate as if it were generating taxable rental income at a fixed rate, regardless of whether the owner had actually earned a single rupee from that property.

In plain terms, if you owned a plot or house that you weren’t renting out or selling, the tax authorities could still charge you income tax on what they assumed you should have earned. The law imposed this tax from tax year 2022 onwards, calculated at a rate of 5% of the property’s fair market value.

The law did carve out some exceptions. It excluded a person’s single self-owned property, business premises used by active taxpayers, agricultural land used for farming, properties owned by provincial or local governments, and assets allotted to armed forces personnel or war-wounded individuals. Properties with a combined fair market value below Rs. 25 million were also exempt.

But for everyone else, salaried professionals, retired civil servants, heirs to family property, and major business houses alike, unexpected tax demands quickly followed. In a country where real estate has historically been the default savings vehicle for the middle class, the provision struck a raw nerve almost immediately.

A Four-Year Legal War Across the Country

What followed Section 7E’s introduction was one of the most sprawling tax litigations Pakistan has ever seen. Over 200 petitioners, from individual homeowners in Karachi to major textile conglomerates in Lahore, from bar associations to listed corporations, challenged the law in High Courts across the country.

The results were deeply inconsistent, creating a confusing patchwork of legal rulings that differed province by province:

The Peshawar High Court and the High Court of Balochistan struck down Section 7E entirely as ultra vires the Constitution. The Islamabad High Court charted a middle course, declining to invalidate the entire provision but declaring subsection (2) unconstitutional.

The Lahore High Court initially sided with the taxpayers through a Single Judge, only for a Division Bench to reverse that verdict and uphold the law. The High Court of Sindh, for its part, dismissed constitutional petitions, leaving Karachi’s taxpayers with no relief.

The result was an absurd situation where your tax obligations depended not on the law itself, but on which province you happened to file your legal challenge in. This clearly called for a single, definitive ruling from the highest court.

The Federal Constitutional Court Consolidates the Cases

The Federal Constitutional Court took up the matter, consolidating a staggering array of cases, civil petitions from Karachi, Lahore, Peshawar, and Quetta; cases transferred from the Islamabad High Court; and freshly filed transfer cases into one grand consolidated hearing.

The bench heard arguments over seven intensive days in April 2026, the 13th, 14th, 15th, 27th, 28th, 29th, and 30th, with a formidable array of advocates on both sides. Senior counsel representing taxpayers included Rashid Anwer, Salman Akram Raja, and Faisal Siddiqi, among others. The Federation and FBR were represented by counsel, including Asma Hamid and Hafiz Ahsan Ahmad Khokhar.

The arguments revolved around several core constitutional questions: Could Parliament lawfully impose income tax on income that was never actually received? Did the provision violate the fundamental right to property? Was the concept of “deemed income” constitutionally valid without any genuine accrual of income? And critically, did the levy actually function as a disguised wealth tax, something Parliament does not have the legislative competence to impose under the Constitution’s legislative lists?

The Verdict: Void from Day One

The court’s decision, reserved on April 30, was read by Chief Justice Amin-ud-Din Khan, who noted that all actions taken by FBR under Section 7E are now void.

The court held that Section 7E is ultra vires the Constitution. It is struck down. It is void ab initio, meaning it is treated as if it never legally existed, from the very moment of its enactment in 2022.

This is a critical legal distinction. The ruling does not just stop the tax going forward; it retroactively erases the legal basis for every assessment, demand, and action taken under Section 7E since it was introduced four years ago.

The Federal Constitutional Court upheld appeals filed by citizens challenging the decisions of the Islamabad and Lahore High Courts, effectively reversing those courts’ conclusions that the provision was constitutional.

Who Benefits?

Taxpayers who received assessments or demands under Section 7E, ranging from salaried individuals to large listed companies, are now formally in the clear.

The decision is expected to provide significant relief to Pakistan’s real estate sector, which had been under pressure since the law came into force. With greater clarity and reduced tax-related concerns, investors are likely to show renewed interest in rental property opportunities within developments such as Citadel 7 and Citadel One3, projects by Chakor. Property owners who had delayed transactions or investment decisions due to this tax liability can now move forward with greater legal certainty.

The FBR, which had filed appeals seeking to reinstate the provision, lost comprehensively. The constitutional court dismissed all appeals filed by the FBR seeking its restoration.

What This Means Going Forward

The ruling is a clear constitutional signal to Parliament: you cannot tax income that does not exist. Fictionalizing income treating the notional rental value of a property as actual taxable earnings crosses a constitutional line between income tax and wealth tax, and Parliament does not have unlimited power to blur that boundary.

For property owners across Pakistan, the immediate takeaway is straightforward. Any tax demand, assessment, or penalty issued under Section 7E has no legal standing. The law is treated as if it never existed. And the FBR has no further recourse on this provision unless Parliament were to attempt a fresh, constitutionally compliant legislative approach a path that would face significant legal scrutiny given this ruling.

For the broader tax and real estate ecosystem, the verdict restores a degree of investor confidence that had been shaken since 2022, and removes what many had called an arbitrary and constitutionally dubious burden from millions of property owners across the country.

For more news on real estate and Special Reports, visit Chakor Ventures.

Citations

  1. Dunya News, “FCC strikes down controversial Section 7E of income tax law”, updated May 7, 2026.
  2. Mettis Global, “FCC strikes down Section 7E tax on property”.
  3. ProPakistani, “Constitutional Court Declares Section 7E Unconstitutional in Major Relief for Property Sector”, May 7, 2026.
  4. HUM News English, “FBR loses appeal as court scraps Section 7E tax rule”.
  5. Federal Board of Revenue, Income Tax Ordinance, 2001 — Amended up to 20.02.2026, Section 7E, “Tax on deemed income.”
CategoriesSpecial Report Economy Feature Article Investment

SBP Raises Policy Rate to 11.5% as Middle East Tensions Fuel Price Pressures

On Monday afternoon, Pakistan’s central bank changed a number that touches nearly every aspect of economic life in the country, from car loans to factory financing. The State Bank of Pakistan (SBP) raised its policy rate by one full percentage point, from 10.5% to 11.5%, effective April 28, 2026. It was the first rate hike in nearly three years, and it caught most analysts off guard.

What Is the Policy Rate, and Why Does It Matter?

Think of the policy rate as the master dial controlling the cost of money in the economy. When the SBP raises it, commercial banks charge more on loans for homes, businesses, and cars. The idea is that pricier credit discourages excessive spending, which in theory slows inflation. When it cuts rates, borrowing gets cheaper, and the economy is nudged to grow faster.

What Prompted This Decision?

The SBP pointed squarely at the ongoing Middle East conflict. The war has pushed up global oil prices, raised freight charges for ships, and increased cargo insurance premiums. For Pakistan, a net energy importer, these translate directly into higher fuel, transport, and electricity costs at home.

Inflation, measured by the Consumer Price Index, stood at 7.3% in March 2026, reflecting moderate but persistent price pressures. Core inflation, the stickier, underlying measure that excludes volatile food and energy, climbed to 7.8%. Both were trending in the wrong direction.

The MPC’s own assessment was stark: the current supply shock may push inflation to double digits in the coming months, and it is expected to stay above the 5–7% target range for most of FY27. The SBP decided that waiting would be riskier than acting early.

Why Were Analysts Surprised?

Economists were divided over the SBP’s 100 bps rate hike, reflecting a broader debate over whether interest rates are the right tool for a supply-driven inflation shock.

Dr. Khaqan Najeeb, former adviser to the Ministry of Finance, called it “a strong pre-emptive response to a classic external supply shock,” but said the size of the move appeared high. In his view, a smaller increase may have sent the same signal while preserving policy flexibility.

That signalling effect is important: central banks raise rates not only to cool demand, but also to shape expectations and discourage businesses and workers from assuming inflation will keep rising.

Dr. Ashfaque Hasan Khan disagreed more strongly, arguing that the inflation pressure was not demand-led: “The rising prices are not due to excessive demand. They are primarily caused by increasing oil prices and supply chain disruptions, factors over which we have no control. The shock is coming from the supply side, for which interest rate is not an ideal policy instrument.”

He also warned that higher rates would raise the government’s borrowing costs and worsen fiscal pressure, adding, “Since we had committed to the IMF in the last review, we had to increase the interest rate. This has nothing to do with Pakistan’s current economic fundamentals.”

The Bigger Picture

Pakistan’s economy has been in recovery mode. Real GDP grew 3.8% in the first half of FY26, compared to just 1.9% in the same period a year earlier, while the current account posted a small surplus during July–March, supported by resilient workers’ remittances. 

FX reserves stood at around $15.8 billion as of April 24, with the SBP projecting a rise above $18 billion by June 2026, partly buoyed by a Eurobond issuance, Pakistan’s first return to international capital markets in over four years.

The less comfortable side: tax collection fell short of target by Rs 611 billion through March, and GDP growth for FY26 is now expected at the lower end of the projected range.

What It Means in Practice

Higher rates mean more expensive loans across the board. Small businesses relying on bank credit will feel the squeeze most. Savers, on the other hand, typically earn better returns when rates rise. For the government, servicing Pakistan’s large domestic debt becomes costlier, adding pressure to an already strained budget.

What to Watch Next

The next MPC meeting in June coincides with the federal budget, making it one of the most consequential economic moments of the year. If Middle East tensions cool and oil prices ease, the case for further hikes weakens, and cuts could return sooner than expected. If the conflict deepens, more tightening cannot be ruled out.

The clearest indicator to watch is core inflation. If it stabilises over the coming months, the rate hike is doing its job. If it keeps rising despite higher borrowing costs, it would suggest the real problem lies beyond the reach of monetary policy in global commodity markets and fiscal decisions that only the government can make.

For more news on real estate and Special Reports, visit Chakor Ventures.

Citations