ICMA Outlook: Improved External Conditions Offer Pakistan Breathing Space Ahead of MPC Meeting

Pakistan’s external economic conditions have improved, offering some relief ahead of the next Monetary Policy Committee (MPC) meeting. The Institute of Cost and Management Accountants of Pakistan (ICMA) highlighted this trend in its latest Pre-Monetary Policy Outlook.

According to ICMA’s External Economic Stress Index (EESI), Pakistan’s external stress level fell to -6.12 in August 2026. The reading indicates that supportive global conditions outweighed external vulnerabilities during the period.

The report identifies stronger global economic activity, resilient remittance inflows and improved foreign investment trends as key sources of support. However, ICMA cautioned that external risks remain and require close monitoring.

ICMA Index Tracks External Economic Risks

ICMA developed the EESI using an analytical framework adapted from international best practices. The index measures Pakistan’s exposure to external economic shocks through five indicators.

These include global economic growth, international oil prices, food prices, financial market volatility and global supply-chain pressures. Together, these indicators help policymakers assess risks from the global economy and their potential impact on Pakistan.

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The August reading points to easing external pressures. According to the report, stronger global activity has supported exports, remittances and investor confidence. Meanwhile, a recovery in foreign direct investment has helped reduce pressure on the external account.

Oil Prices and Geopolitical Tensions Remain Risks

Despite the improvement, ICMA warned that Pakistan remains vulnerable to global economic disruptions. Rising international oil prices, geopolitical uncertainty and supply-chain problems continue to pose significant risks.

Pakistan’s dependence on imported energy makes these developments particularly important. Higher oil prices could increase inflation, raise the import bill and place additional pressure on the country’s external account.

Moreover, unexpected global shocks could reverse recent gains. The report therefore stresses the need for continued vigilance as policymakers prepare for monetary policy decisions.

ICMA Recommends Stronger Risk Monitoring

ICMA has recommended several measures to strengthen Pakistan’s external-sector management. These include closer monitoring of external risks and regular stress tests of financing requirements.

The institute also called for better foreign exchange liquidity planning. In addition, it recommended incorporating scenario-based assessments of global risks into monetary policy decisions.

These measures could help policymakers identify potential pressures earlier. They could also improve preparedness for changes in global financial conditions, energy markets and supply chains.

Balanced Monetary Policy Remains Important

ICMA emphasised that improving external conditions provide some breathing space, but they do not eliminate Pakistan’s economic vulnerabilities. Sustaining stability will require prudent policymaking and close attention to emerging global challenges.

The institute said a balanced monetary policy, supported by effective external-sector management, would be essential to preserving macroeconomic stability. This approach could also help support Pakistan’s economic growth in the coming months.