Rupee to hold at Rs278/USD in 2026 as Pakistan’s FX buffers improve: BMI

BMI, the Fitch Solutions unit, has moved its end-2026 rupee forecast to Rs278 per dollar from Rs288, and now expects the currency to hold near that level through the year. The revision reflects stronger foreign exchange reserves, a tight monetary stance and improved access to global capital markets. Business Recorder reported that policymakers are now seen holding the rupee steady instead of devaluing it.

By the end of 2027, BMI expects policymakers to let the rupee slide to around Rs292 per dollar, aiming to regain export competitiveness. The firm cites a real effective exchange rate that reached 107.9 in July, its highest in eight years, alongside a merchandise trade gap that grew 34.6% to USD39.6bn in FY25/26. Remittances have so far limited the damage, though BMI doubts they can keep covering a growing gap.

On policy, the State Bank of Pakistan lifted its benchmark by a full percentage point to 11.50% in April, after inflation accelerated amid the US-Iran conflict. BMI expects no further change, since elevated global energy and food costs should keep inflation above the 5-7% target for the rest of the fiscal year. Rates still sit well above the 7.00% level seen before the 2022-2023 external payments crisis, which should help deter capital outflows. BMI warned that a prolonged escalation would keep energy prices higher, widening the import bill.