Summary：**FY26 Forecast Shows Fragile External Balance Sparks Concern****Introduction** Analysts warn that

**FY26 Forecast Shows Fragile External Balance Sparks Concern**

**Introduction**
Analysts warn that the projected FY26 external balance remains precarious, raising alarms for policymakers and investors alike. The latest macro‑economic outlook highlights a widening gap between export growth and import demand, driven by softer commodity prices and lingering supply‑chain disruptions. As governments prepare budget plans, the fragility of the external sector has become a focal point in discussions about fiscal sustainability and exchange‑rate stability.

**Key Developments**
Recent data releases show that merchandise exports grew only 2.1% year‑on‑year in the first half of FY25, well below the 4.5% target set in the previous fiscal framework. Meanwhile, imports rose 3.8%, fueled by rebounding domestic consumption and higher energy bills. The current‑account deficit is now projected to reach 3.2% of GDP in FY26, up from 2.6% in FY25. Currency markets have reacted sharply, with the local currency depreciating 4.7% against the dollar over the past quarter, increasing the cost of servicing foreign‑denominated debt.

**Industry Analysis**
Sector‑specific insights reveal that the manufacturing base, traditionally a driver of export earnings, is facing capacity constraints due to semiconductor shortages and logistical bottlenecks. Services exports, particularly in tourism and IT, have shown resilience but remain vulnerable to global travel restrictions and data‑privacy regulations. Economists note that the external balance’s fragility is amplified by a reliance on a narrow range of commodities; any further price shock could exacerbate the deficit. Moreover, rising interest rates in major economies are tightening global liquidity, making external financing more expensive and less accessible.