The foreign exchange reserves held by the central bank surged 18pc on a weekly basis, according to data released by the State Bank of Pakistan (SBP) on Thursday.
On December 13, the foreign currency reserves held by the SBP were recorded at $10,892.9 million, up $1,659.3 million compared with $9,233.6 million in the previous week. Such levels were last seen in May 2018.
The overall liquid foreign currency reserves held by the country, including net reserves held by banks other than the SBP, stood at $17,655.5 million. Net reserves held by banks amounted to $6,762.6 million.
“This increase is attributed to multilateral and other official inflows including the $1.3 billion received from the Asian Development Bank (ADB),” said the SBP in a statement.
“A major improvement in the foreign exchange reserves came from a significant contraction in the current account deficit,” Taurus Securities’ Deputy Head of Research Mustafa Mustansir said, citing a statement issued by the SBP a couple of days ago.
“The bulk of the increase in the net reserve buffers is accounted for by the continued current account improvement,” the SBP reported on Monday.
The current account deficit dropped 73pc to $1.82 billion in first five months (Jul-Nov) of the current fiscal year compared to $6.73 billion in the same period of previous year, according to the central bank.
Foreign investment in sovereign debt instruments like treasury bills and Pakistan Investment Bonds (PIBs) “accounts for less than one-fifth of the increase in SBP’s net reserve buffers at current levels”, the central bank said.
Mustansir added that foreign investment in the debt market and loans received from the International Monetary Fund (IMF) and ADB also played an important role in building up the reserves.
Last week, the SBP also made a massive repayment of $1 billion for the maturing international Sukuk of Pakistan.