💱 THE RUPEE RATE

For every £1,000 you send home this week, your family receives approximately Rs 374,000. Rates checked 1 August 2026

📈 KSE-100 THIS WEEK

The KSE-100 Index settled at 178,262.33 on Monday 27 July, up 7,241.13 points or 4.23% in a single session - one of the strongest single-day performances of the year. The rebound followed a difficult week for the PSX, as escalating tensions in the Middle East, particularly the Houthis' announcement of a blockade in the Red Sea, had dampened investor confidence. Three factors drove the Monday surge simultaneously: oil prices fell 4-5%, the SBP held rates as expected, and institutional buyers stepped in aggressively across banking, cement, oil and gas, and textile sectors. The index remains approximately 30% above where it was a year ago.

S&P just upgraded Pakistan's credit rating to B - the first upgrade since 2016. Here is what this means and why it matters more than most people realise.

What happened

S&P Global Ratings upgraded Pakistan's long-term sovereign credit rating from B- to B on 22 July 2026, assigning a Stable outlook. The upgrade reflects improvements in Pakistan's economic and financial indicators. Pakistan's foreign exchange reserves reached $25.3 billion by the end of June 2026, up sharply from $6.7 billion in December 2022. The agency added that the current level of reserves is sufficient to meet Pakistan's external financing needs over the next 12 months. Political stability has bolstered the government's capacity to implement reforms. The government was able to significantly increase tax revenues by 3.2 percentage points of GDP in the 12 months to June 2025, and tax revenue collection has continued this momentum in fiscal 2026. Pakistan also sought a $10 billion exchange stabilisation facility from the United States to help boost foreign exchange reserves and ease pressure on the Pakistani rupee, though neither the US Treasury nor Pakistan's Finance Ministry has officially confirmed the reported request.

Why it matters

A sovereign credit rating is the single most important number in international finance for a country. It is what global investors, pension funds, insurance companies, and banks use to decide whether to lend money to Pakistan, what interest rate to charge, and whether to buy Pakistani bonds. For the past decade, Pakistan has been rated in the B- to CCC range - territory associated with high default risk, expensive borrowing, and difficulty accessing international capital markets. For the first time since 2016, Pakistan has regained a B sovereign credit rating from S&P Global Ratings. The upgrade from B- is proof of growing international confidence in the economy.

The three drivers S&P identified are worth understanding in detail because they tell the story of Pakistan's recovery. First, reserves: foreign exchange reserves had climbed to $25.3 billion at end of June 2026 from $6.7 billion in December 2022 - more than sufficient to cover the government's external principal payments of $16.4 billion over the next 12 months. Second, fiscal consolidation: the government's efforts to expand its revenue base have hastened the pace of fiscal consolidation, facilitating a steady decline in its net general government debt-to-GDP ratio, with the general government deficit forecast at 4% of GDP in fiscal 2027, down from close to 8% in the crisis years of FY2022 and FY2023. Third, political stability: since the February 2024 general elections, the coalition government has been able to advance reforms and meet IMF programme targets without significant social pressure.

The practical consequence of a higher credit rating is lower borrowing costs. In April 2026, Pakistan entered international capital markets for the first time in four years with a $750 million Eurobond and an inaugural panda bond issuance of $250 million. With a B rating and stable outlook, the cost of future issuances falls - meaning Pakistan pays less interest on its international borrowing, freeing up fiscal space for development spending rather than debt servicing.

What it means for you

A credit rating upgrade has three direct implications for expat readers of this newsletter. First, it reduces the risk of a sudden rupee depreciation driven by a debt crisis - with $25.3 billion in reserves and a B rating, the kind of emergency that forced the rupee from 200 to 300 against the dollar in 2022-23 is significantly less likely to recur in the near term. Second, it makes Pakistan's international bonds more attractive to global investors, which means more capital inflows and better rupee support. Third, and most practically, it signals that the structural improvement in Pakistan's economy is being recognised by independent international analysts - not just by Pakistani government press releases. When S&P upgrades a sovereign, it is saying the numbers check out.

The SBP held rates at 11.5% on Monday. But it signalled cuts are coming. Here is what the MPC actually said - and what it means for your money.

What happened

The State Bank of Pakistan kept its policy rate unchanged at 11.5% on Monday 27 July. The central bank cited lingering inflation pressures and uncertainty from Middle East developments despite improved external accounts. The latest decision follows another hold in June, after the SBP had raised the policy rate by 100 basis points in its April 27 meeting. In a press briefing, SBP Governor Jameel Ahmad said that CPI inflation is expected to decline in July. "We expect the CPI to clock in at the upper band of our target range of 5-7% by the end of this fiscal year," said Ahmad. The SBP projected an improvement in key macroeconomic indicators for the year ahead. Separately, friendly countries rolled over around $6 billion in July 2026, providing an early boost to Pakistan's external position for FY27.

Why it matters

The hold itself was expected by 97% of the market and carries no surprise. What matters is what the SBP said around it. The Governor's statement that inflation is expected to decline in July and reach the upper band of the 5-7% target range by year end is a meaningful signal. It means the SBP believes the worst of the inflation spike - which peaked at 11.7% in May - is behind us. The recent upgrade of Pakistan's credit rating by S&P to B with a Stable outlook confirms the stabilisation achieved under the IMF, but analysts note it does not in itself create an opportunity for a rate reduction given rising oil prices and export shortfalls.

The $6 billion rollover from friendly countries - Gulf states and China - in July alone is the other significant number from this week. Pakistan's external financing for FY27 is already being secured at the very start of the fiscal year. Each rollover reduces the risk of a reserves crisis and gives the SBP more confidence to eventually ease monetary policy without triggering a currency sell-off. The combination of the S&P upgrade, the $6 billion rollover, and the SBP's inflation optimism paints a picture of a central bank that is preparing the ground for rate cuts - just not yet.

What it means for you

The SBP's own forecast - CPI at the upper band of 5-7% by end of FY27 - implies that rate cuts are coming, most likely in the September or November MPC meeting, assuming the Middle East situation does not deteriorate further. When cuts do come, two things happen that directly affect you. New fixed deposit rates in your RDA will fall - so the 10.5-11% returns currently available on PKR term deposits will reduce. And the KSE-100 typically rallies on rate cut expectations - which benefits anyone holding Meezan ETF or Pakistani equities.

The practical implication is clear: if you have been considering opening a PKR fixed deposit in your RDA, the window of elevated rates is measured in months, not years. The SBP is telling you inflation is coming down and rates will follow. Lock in current returns now while they remain available. A six or twelve-month fixed deposit opened this week captures the current rate environment and is fully protected from any future SBP cuts until maturity.

$25.3 billion - Pakistan's foreign exchange reserves as of end June 2026, up from $6.7 billion in December 2022 - a nearly fourfold increase in three and a half years. This is the number that underpins everything else in Pakistan's economic recovery story. The credit rating upgrade, the rupee stability, the SBP's confidence about future rate cuts, the ability to roll over debt - all of it flows from having adequate reserves. Three years ago $25.3 billion would have seemed like an impossible target. Today it is reality. S&P confirmed these reserves are more than sufficient to cover Pakistan's external principal payments of $16.4 billion over the next 12 months - meaning Pakistan has a full year's worth of debt payments sitting in reserve right now.

⚡ THE QUICK THREE

🏠 EXPAT CORNER - This week’s practical tip

Pakistan just got a credit rating upgrade. Rates are going to be cut eventually. What should you do with your PKR savings right now?

This week's combination of events - S&P upgrade, SBP hold with dovish signals, $6 billion rollover, KSE-100 surge - creates a specific and time-limited opportunity for anyone with PKR savings or planning to add to them.

Here is the situation in plain terms. The SBP rate is currently 11.5%. The SBP Governor has publicly said inflation will return to the 5-7% target range by end of FY27. When that happens, the SBP will cut rates. When rates are cut, new PKR fixed deposit rates fall. The window of double-digit returns on PKR savings instruments is closing - not this week, but over the next two to four MPC meetings.

Three actions to consider before the end of August.

First, if you have an RDA and cash sitting in a savings account earning the variable rate, move it into a fixed deposit now. Choose a twelve-month term to lock in the current rate fully. The difference between a savings account rate and a fixed deposit rate at current SBP levels is typically 150-200 basis points - real money on any meaningful balance.

Second, if you have been thinking about opening an RDA but have not yet done so, this is the last window of genuinely elevated PKR yields before the cutting cycle begins. The process takes 15-20 minutes online at HBL, MCB, UBL, Meezan, or Habib Bank. Do it this weekend.

Third, for anyone with a longer horizon who is comfortable with equity risk, the KSE-100's 4.23% single-day move on Monday - driven by falling oil and rate hold expectations - hints at what could happen when the SBP actually does cut rates. Markets typically rally in anticipation of cuts, not just when they arrive.

One final note on the S&P upgrade specifically: the upgrade to B with Stable outlook means there is now a credible path to B+ over the next 12-24 months if Pakistan continues on its current trajectory. Each notch up reduces Pakistan's borrowing costs and attracts more foreign capital. That is a structural positive for the rupee and for PKR-denominated investments over a multi-year horizon.

Next SBP meeting: September 2026. Next petrol revision: daily under the new OGRA mechanism. Hit reply - what do you most want covered next week?