Business Recorder Editorials 19th September 2026

State of the economy: a mixed picture

EDITORIAL: Recent data releases indicate a marked improvement in critical macroeconomic indicators that reinforce the government’s view that stabilisation has been achieved. The current account deficit has narrowed by a whopping 34 percent during the first two months of the current year reflective of a rise in remittance inflows – a rise that was not projected, given the prevailing Middle East conflict.

Reports suggest that this rise is partly attributable to emigrants from other countries leaving the Gulf States due to the war while Pakistanis continue their presence in the region coupled with the increased use of official channels to send remittances.

While this situation will not last once the conflict is resolved; however, the turmoil has not only widened but is also being projected by some political pundits to last till the end of the Trump term.

Additionally, the dual-tranche 3 billion dollars Eurobond issuance strengthened the foreign exchange reserves and the current account, with interest rates lower than the domestic borrowing rate. This consists of a 1.75 billion dollars, 5.5-year bond at a 7.5 percent coupon rate, and a 1.25 billion, 10-year bond at a 7.9 percent coupon rate.

Notably, these bonds are payable in US dollar, while the Pakistani rupee depreciates by an average of 3 percent to 4 percent per year.

July-August 2026 foreign direct investment also rose by 24 percent year-on-year supported by stronger inflows in August. The monthly economic outlook and update for August gave the July 2025 FDI of 178.6 million dollars against 223.6 million dollars in July 2026 - a decline of 45 million dollars.

The July-August 2026 figure as per the State Bank of Pakistan was 495 million dollars, giving a total of 316.4 million dollars for August 2026 against 398.6 million dollars for the same period of 2025 (though there is a discrepancy of 34.3 million dollars with the Finance Division figure of 364.3 million dollars). While there is little need for complacency as this amount is extremely low compared to other regional countries yet one would hope that the upward trend will continue.

Large scale manufacturing (LSM) grew by 3.03 percent year-on-year and 9.51 percent month-on-month. This is an extremely positive feature of the economy as it reflects higher Gross Domestic Product (GDP) growth and new employment opportunities.

Sadly, this improvement is being openly challenged by the LSM with the textile sector claiming that more than 100 units have been closed down to a massive rise in their input costs (due to administrative measures as part of the International Monetary Fund conditions) – a claim strengthened by the fact that as per the monthly update of the Finance Division credit follow to the private sector rose from negative 232.1 million rupees July to August 2025 to negative 393.4 million rupees in the same period of 2026.

The largest growth sectors were automobiles (57 percent) followed by garments (22 percent).

There is no doubt that the global economy is suffering from major supply disruptions due to not only the Middle East but also the Russia-Ukraine conflict and there is little likelihood of either conflict ending anytime soon.

This necessitates the need to strategize the way forward instead of engaging in fire-fighting actions, particularly extending subsidies, from a kitty whose fiscal space narrows further as a consequence. There is a need to formulate an energy sector plan to better cope with global fuel shortages—which, when available, come at a very high price—and to reduce expenditures across the board.

This, in turn, would reduce the need to increase revenue through traditional means like raising taxes or widening the ambit of existing taxes.

The general public is already experiencing an almost daily rise in the cost of fuel. Unless mitigating measures are put in place—notably, a plan to slash demand for petrol and fuel used for electricity generation—the situation will only become worse.

Cleaning up the game

EDITORIAL: It seems the rapid expansion of online gaming and gambling has created a remarkably convenient new highway for illicit money just as regulators are struggling to police the increasingly complex digital routes through which it moves. The Financial Action Task Force’s (FATF’s) latest warning, based on surveys across 80 jurisdictions, therefore, deserves urgent attention.

Platforms built to move money quickly across borders, payment systems and currencies can also be exploited to launder criminal proceeds, finance terrorism and, to a lesser extent, facilitate proliferation financing. And, as the digital economy becomes more interconnected, following the money is becoming considerably harder.

The scale of the regulatory problem has grown with the industry itself. Online gambling platforms can operate across jurisdictions, accept payments through cash, e-wallets, mobile money and virtual assets, and connect with social media, digital marketplaces and other services. Some participants in this sprawling ecosystem fall outside conventional anti-money laundering and counter-terrorist financing frameworks altogether.

A transaction can therefore cross several regulatory boundaries almost as quickly as a user can place a bet, while investigators remain constrained by national laws, different reporting requirements and cumbersome mechanisms for international cooperation.

Criminals have predictably discovered the possibilities. FATF has identified cases where gambling platforms are used to transfer money without meaningful gambling activity, while multiple small transactions can be employed to avoid detection.

Large or coordinated bets can raise separate concerns about manipulation. Illegal and unlicensed offshore operators present an even greater challenge because they can masquerade as legitimate businesses while providing the anonymity that both ordinary customers and criminal networks may find attractive.

In some jurisdictions, FATF says, illegal gambling markets rival or even exceed their legal counterparts.

This should trouble countries such as Pakistan in particular. The country has spent years strengthening its anti-money laundering and counter-terrorist financing architecture and knows from painful experience the economic and reputational consequences of deficiencies in financial monitoring. Digitalisation now demands that those systems evolve continuously.

Financial intelligence designed primarily around banks, conventional transfers and identifiable intermediaries will struggle if illicit funds migrate towards platforms and payment channels where ownership, location and purpose become progressively harder to establish.

The difficulty for regulators is that technological innovation will almost always move faster than legislation.

Closing one route can merely redirect activity towards another platform, payment instrument or jurisdiction. And because online businesses can serve customers without maintaining a meaningful physical presence where those customers live, enforcement increasingly depends upon international cooperation.

Regulatory differences between countries become opportunities for criminals to exploit, especially when information cannot move between authorities as quickly as money moves between accounts.

FATF’s new risk indicators should therefore be treated as operational guidance rather than another document for compliance files.

Regulators, financial institutions, payment providers and law-enforcement agencies need mechanisms for identifying suspicious transaction patterns across gaming-related payments, particularly rapid movement of funds, repeated small transactions and dealings involving unlicensed operators.

Information-sharing between public authorities and private financial intermediaries must also become faster, while emerging payment channels need to be incorporated into risk assessments before criminal networks establish themselves comfortably inside them.

There is an unavoidable wider lesson here. The same digital revolution that has made international commerce cheaper, faster and more accessible has also transformed the business of moving dirty money.

Criminal finance no longer requires suitcases of cash, accommodating bank managers or elaborate chains of shell companies when value can travel through a growing ecosystem of platforms almost instantaneously.

For regulators, therefore, the game has changed rather dramatically. Unfortunately, the people laundering the money appear to have noticed first.