April 2026 will be a tough month for Pakistan’s balance of payments. Pakistan has been asked to repay its total debt of $3.5 billion to the United Arab Emirates (UAE), including a $450 million 30-year-old loan. This, along with a $1.3bn Eurobond maturing on April 8, 2026, has brought the debt repayment needs so far this month to $4.8bn.
The State Bank of Pakistan (SBP) currently has foreign reserves of $16.38bn, while net foreign reserves held by commercial banks are $5.41bn, and the total reserves stand at approximately $22bn. If the government pays 4.8bn in April alone, the SBP reserves will be approximately reduced to $11.5bn; a colossal withdrawal.
A significant diplomatic move in this context is that Saudi Arabia and Qatar have assured Pakistan of around $5bn in financial assistance to help stabilise reserves and maintain external payment capacity. Last week, the SBP confirmed that Pakistan has received $2bn from Saudi Arabia.
Pakistan already recorded an eight per cent decline in exports during 9MFY26, and the exports to the Gulf Cooperation Council (GCC) countries may fall by approximately by $1.5 to 2bn in case the Strait of Hormuz remains closed over a longer period.
Geopolitical uncertainty has hastened foreign capital outflows, and portfolio investor risk appetite has fallen across all emerging markets, including Pakistan
A difficult recent development that may hit Pakistan harder is that the International Monetary Fund (IMF) has downgraded the Middle East’s regional real GDP growth to only 1.8pc in 2026, a reduction of 2.4 percentage points. This could mean less remittances to Pakistan from income-constrained Gulf states, a lifeline for Pakistan.
The IMF’s April World Economic Outlook Report says that the Fund anticipates providing $20-50bn in emergency balance of payments assistance to the world. Though Pakistan is among the most vulnerable nations, a recent relief is the $1.2bn staff-level agreement in March, which remains a key to providing a liquidity buffer during this time, but is not enough to cushion the economy against such a complex external shock.
Although a two-week ceasefire was declared on April 7, the Strait of Hormuz is effectively under Iranian control, and some reports indicate Tehran is demanding cryptocurrency tolls of $1 per barrel, mandatory cargo checks, and the right to approve each ship. The number of ships transiting through the strait had decreased from 135 to around 10 to 15 ships per day.
Producers in the Gulf cannot export while their storage is full, and there is no other route to transfer oil at the same scale. More importantly, the blockage comes at a time when governments across the globe have already felt the impact of Covid, the Russia-Ukraine energy crisis, and US President Trump’s tariffs.
The average G-7 debt-to-GDP ratio is already over 100pc, and they are much less prepared to absorb the impact than they were during previous oil crises. Consequently, the current crisis has already been described by the International Energy Agency as “the largest energy crisis we have ever faced”.
Pakistan is amongst the most structurally vulnerable to this shock. The petroleum products are a major contributor to total imports in the country, and more than 80pc of the oil needs in the economy are met via imports. More importantly, 81.6pc of the energy imports pass through the Strait of Hormuz, the waterway that is currently blocked.
As stated by Pakistan Institute of Development Economics (Pide), an increase of $10 in the global oil prices will cost Pakistan an additional $1.8-2bn in the annual bill for imported petroleum. Overall, the price increases may raise the import bill by $4.5bn, and the trade deficit may reach a new high of approximately $41.8bn.
Finance Minister Muhammad Aurangzeb has already pegged the immediate monthly increment at $600m. Pakistan has a very slim margin of petroleum reserves, which lasts for only a few weeks at most. It is not only crude oil that is damaged; in January 2026 Pakistan got 12 LNG shipments, in March, when the war started, there were only two shipments.
The domestic effects have come in two waves. The government increased petrol and diesel prices by Rs55 per litre (a 20pc increase) on March 6. Then, on April 3rd, petrol prices were increased by Rs137.24 to Rs458.41 per litre (an increase of 42.7pc), before being reduced by Rs80 the next day, and high-speed diesel increased by Rs184.49 to Rs520.35 per litre (an increase of 54.9pc) from April 4 onwards. Last Friday, the diesel price was reduced by Rs32.12.
To keep the line, the government spent more than Rs100bn on subsidies.The spillovers are still short-term; however, Pide predicts that inflation could rise to 17pc as the war continues and oil prices keep skyrocketing. Our estimate of inflation lies between 10.7pc and 11.7pc for April 2026. This is textbook cost-push inflation, and unlike demand-pull inflation, the SBP cannot correct it by increasing interest rates.
At present, the exchange rate is under a twofold burden. An increasing oil import bill would cause an outflow of more dollars from the forex market, which is already stretched by the April debt repayments, and would put direct downward pressure on the rupee against the dollar.
Currently, the rupee is not in crisis, and we haven’t seen inflation hit the worst-case predictions yet. The assurances of $5bn from Saudi Arabia and Qatar will provide a near-term bridge, but they’re not a structural fix. The April 7 ceasefire is fragile; no agreement has been reached between the US and Iran as of April 12, 2026. The Strait of Hormuz is not yet peaceful, and the IMF has warned that there will be no clean-up to pre-war levels even in the best case.
Dr Ateeb Syed is a visiting professor of economics at Grand Valley State University, Michigan, United States of America, and research fellow at the Centre for Economic and Business Research, IBA, Karachi.
Khanzaib Ahmed is a research assistant at the Economic Growth and Forecasting Lab, IBA, Karachi.
Published in Dawn, The Business and Finance Weekly, April 20th, 2026
