The State Bank of Pakistan (SBP) purchased over $9 billion from the local market in 2024 to stabilize foreign exchange reserves, a record intervention disclosed by Governor Jameel Ahmad during a Senate Standing Committee on Finance meeting, The Express Tribune reported.
Of the total amount, $4.5 billion was acquired in the second half of the year, enabling reserves to remain at $11.7 billion despite $5.7 billion in debt repayments during the first half of the fiscal year.
Governor Ahmad highlighted that market-based acquisitions have improved the “quality” of reserves, ensuring they remain less dependent on external borrowing. Without these interventions, reserves could have dropped below $3 billion, potentially destabilising the economy and triggering higher inflation.
The SBP governor also confirmed that Pakistan has requested the United Arab Emirates (UAE) to roll over $2 billion in cash deposit debt maturing between January 17 and 21. The UAE has committed to this rollover as part of its agreement with the International Monetary Fund (IMF) under the $7 billion Extended Fund Facility.
Ahmad further disclosed that bilateral and commercial creditors are expected to roll over $16 billion in debt, including $2 billion from the UAE, to mitigate external repayment pressures. The central bank aims to balance reserves and debt obligations, with $4.6 billion in repayments due in the second half of FY25.
During the meeting, Senate Standing Committee Chairman Saleem Mandviwalla raised concerns about the $277 million paid to Visa and MasterCard for local transactions, which were charged from 287 million transactions last year. These fees, collected on payments made in local currency, are recouped from annual charges imposed on credit and debit cardholders.
Mandviwalla criticised the outflow of dollars, urging the SBP to halt such payments or face legislative action. He proposed introducing separate debit and credit cards for local and international transactions to reduce reliance on foreign payment platforms. Of the 44 million debit and credit cards issued in Pakistan, only 11 million are locally owned, according to the SBP executive director.
The committee also questioned the Pakistan Remittance Initiative (PRI), revealing that 80% of the Rs86 billion allocated for promoting remittances is being used for incentives abroad. The SBP acknowledged that a significant portion of the initiative’s budget is flowing to overseas remittance channels.
Senator Shibli Faraz, the Opposition Leader in the upper house, raised doubts about the sustainability of the central bank’s dollar purchases and their impact on the economy. He argued that the artificial stabilization of reserves could be hindering long-term economic reforms.
The SBP governor countered that the purchases, made at the close of daily trading sessions, were necessary to stabilise the foreign exchange market and prevent reserves from falling to unsustainable levels. “The dollar supply exceeds market demand, allowing us to maintain stability,” he added.
On the other hand, Pakistan’s total external debt reached $133 billion by December 2024, with external public debt amounting to $101 billion.
