💱 THE RUPEE RATE

For every £1,000 you send home this week, your family receives approximately Rs 378,000. Rates checked 16 May 2026

📈 KSE-100 THIS WEEK

The KSE-100 dropped 1,174 points on 27 April as investors traded cautiously ahead of the SBP rate decision, settling at 169,497. It has since partially recovered. The index remains up over 40% year-on-year - but the rate hike introduced new uncertainty that markets are still digesting.

The State Bank just raised interest rates for the first time since June 2023. Nobody saw 100 basis points coming.

What happened

The State Bank of Pakistan raised its benchmark policy rate by 100 basis points to 11.5% on 27 April 2026, surprising analysts who expected it to remain steady at 10.5%. This marked the first rate hike since June 2023, amid heightened economic uncertainty, with volatile oil prices from Middle East tensions clouding the inflation outlook. Policymakers said a tighter stance was needed to anchor inflation expectations and contain second-round effects of the current supply shock.

Why it matters

To understand the significance of this, you need to know what came before it. Over the 18 months prior to this decision, the SBP had cut rates eleven times - from a peak of 22% all the way down to 10.5%. That was one of the most aggressive easing cycles Pakistan had ever seen, designed to revive growth after years of economic pain. Businesses had started borrowing again. The stock market had surged. The rupee had stabilised.

Most economists surveyed before the decision expected no change, arguing that recent price pressures are largely supply-driven and may prove temporary. The 100bps hike was therefore a genuine shock - double what even the most hawkish analysts had forecast.

The SBP's reasoning is straightforward even if the timing surprised markets. Pakistan's inflation is projected to remain within the 8-9% range in April 2026, reflecting persistent but manageable price pressures amid global uncertainty, with rising international oil prices and ongoing supply chain constraints continuing to influence the domestic price environment. The SBP looked at that trajectory and decided it needed to act before inflation expectations became entrenched. Once people and businesses start expecting 9% inflation and pricing accordingly, it becomes self-fulfilling - and much harder to bring back down.

What it means for you

Three direct impacts for UK Pakistani expats:

Your RDA returns just got more attractive. If you hold a Roshan Digital Account fixed deposit or Naya Pakistan Certificate, your existing rate is locked in and unaffected. But if you have been sitting on cash in your RDA savings account, the rate environment has shifted in your favour. New fixed deposit products at Pakistani banks will now reflect the higher rate environment - yields on PKR instruments are heading higher. Worth checking with your bank this week.

The rupee impact is mixed. Higher rates traditionally support a currency by attracting yield-seeking capital. The slight rupee strengthening we have seen - from 377 to 372 against the pound - is partly a reflection of this. However, higher rates also slow economic growth, which can weaken the currency through other channels. Net effect: modest rupee stability, not a dramatic move either way in the near term.

Businesses and the stock market face pressure. Higher borrowing costs mean lower corporate profits, which is why the KSE-100 fell on the day of the announcement. If you hold Pakistani equities, expect some near-term volatility as markets adjust to the new rate environment.

The IMF just released $1.3 billion to Pakistan. Pakistan's reserves have hit $21 billion. Here is why this matters more than people realise.

What happened

The IMF Executive Board completed the third review under Pakistan's Extended Fund Facility in its meeting held on 8 May 2026 and approved the disbursement of SDR 760 million. The IMF Executive Board also approved the disbursement of the second tranche of SDR 154 million under the Resilience and Sustainability Facility. The SBP confirmed it had received a total of SDR 914 million, equivalent to about $1.3 billion, from the IMF on 12 May 2026.

Pakistan's total liquid foreign exchange reserves stood at $21.293 billion as of 30 April 2026, of which the SBP held $15.851 billion, while net reserves held by commercial banks amounted to $5.443 billion.

Why it matters

Cast your mind back to Issue #1. At that point Pakistan's reserves were around $14 billion and the country was staring down a $1.3 billion Eurobond repayment. The question then was whether Pakistan could keep its head above water. During April 2026 alone, the country repaid around $5 billion in external debt, creating significant pressure on the external account - a major portion included the successful redemption of a $1.8 billion Eurobond, along with approximately $3.5 billion paid to the UAE.

Despite paying out $5 billion in a single month, reserves have climbed to $21 billion. That is not by accident. It is the result of Saudi Arabia's $3 billion deposit arriving in two tranches, the IMF's $1.3 billion, and continued strong remittance inflows. Remittances reached $30.3 billion, while foreign direct investment reached $1.4 billion, led by inflows into power and financial services.

The $21 billion reserve figure is the highest Pakistan has held in years. The original IMF target was $18 billion by end of fiscal year June 2026 - Pakistan has already exceeded it with six weeks to spare. Alongside the disbursement, an IMF delegation has arrived in Pakistan for consultations on the new federal budget, marking the formal launch of preparations for the budget-making process.

What it means for you

Healthy reserves mean a stable currency. They mean Pakistan can meet its import bills without scrambling. They mean the government has room to manoeuvre if another shock hits. For anyone sending money home regularly, this is the single most important indicator to watch - not the KSE-100, not inflation headlines, but the reserves number. When reserves are above $18 billion and the IMF programme is on track, the rupee is structurally supported. Right now, both conditions are met.

$21.3 billion — Pakistan's total foreign exchange reserves as of 30 April 2026. Six weeks ago that number was $16.4 billion. The turnaround - driven by Saudi deposits, the IMF tranche, and strong remittances - is one of the fastest reserve rebuilding episodes in Pakistan's recent history. For context, $21 billion represents roughly 4.5 months of import cover, comfortably above the 3 months that international lenders consider the minimum safe level. Pakistan is not just surviving - its external position is genuinely improving.

⚡ THE QUICK THREE

🏠 EXPAT CORNER

Interest rates just went up. Should you move money into Pakistan now or wait?

The 100bps rate hike changes the calculus for anyone holding cash in a Roshan Digital Account or considering opening one. Here is the honest breakdown.

If you already have money in a PKR fixed deposit: you are fine. Your existing rate is locked. Do nothing.

If you have cash sitting in a PKR savings account earning the floating rate: the rate environment has improved. Ask your bank what new fixed deposit rates are available post-hike - they should be higher than what was on offer a month ago.

If you have been sitting on GBP and considering converting to PKR: the current rate of 372 interbank is the most favourable it has been since March. Combined with the improved rate environment on PKR instruments, the risk-reward for a medium-term PKR position has improved. The caveat: the Middle East ceasefire situation remains the wildcard. If conflict re-escalates and oil spikes again, inflation could overshoot and the rupee could weaken. Size your position accordingly - do not put everything in at once.

The next big date: the June budget. Tax changes and subsidy decisions in the budget will directly affect both inflation and the rupee. We will break it down the moment it drops.