The State Bank of Pakistan (SBP) announced that it had purchased a net $722 million from local currency markets in July 2024, marking a record monthly intervention aimed at bolstering foreign exchange reserves and supporting foreign debt repayment.Â
According to a news report, this absorption of surplus US dollars comes as the rupee strengthened by Rs0.15, settling at Rs277.70 against the dollar, halting a four-day decline.
This marks the second month the SBP has disclosed its foreign exchange market activities under a recent transparency commitment.Â
The SBP has also cited sufficient dollar availability due to increased remittances and improved export earnings, creating a favorable market supply.
In the first quarter of FY25, worker remittances reached a record $8.8 billion, a 39% increase from the same period last year, while export earnings rose by 8% to $7.4 billion.Â
The central bank now reports monthly interventions with a three-month lag, having previously bought a net $573 million in June.Â
This surplus in dollar supply has provided the central bank with an opportunity to make advance purchases, reducing pressure on reserves and ensuring debt repayments.
With the SBP’s foreign reserves rising by over $2 billion over the past three and a half months to $11.15 billion, partly aided by a $1.03 billion loan from the International Monetary Fund in late September, the central bank and government continue efforts to balance the current account.Â
Their strategy limits imports to align with remittance inflows and export earnings, aiming to keep the current account deficit at breakeven and push reserves to $13 billion by fiscal year-end.
Both current and former SBP governors have indicated that the bank actively injects dollars into the market when required to mitigate rupee volatility. After a cumulative four-day decline of Rs0.21 against the dollar due to slowed dollar sales, the rupee’s gain on Friday follows a weekly reserve increase of $116 million, easing market pressure.
