Pakistan’s foreign exchange reserves reached a significant milestone in mid-October, surging past $11 billion for the first time in over 30 months. According to data from the State Bank of Pakistan (SBP), the reserves grew by $215 million in the week ending October 11, 2024. This marks the 12th consecutive week of growth, fueled by inflows from the International Monetary Fund’s (IMF) $7 billion loan programme and other external sources.
Over the past three months, the reserves have increased by approximately $2 billion, with half of the growth occurring after the arrival of the IMF’s first tranche in late September. With the recent rise, Pakistan now holds sufficient reserves to cover over two months of imports, a notable improvement from June 2023 when import cover was less than a month.
The Pakistani rupee also responded positively, appreciating slightly by Rs0.05, ending a three-day losing streak. While the central bank did not specify the cause of the latest increase, recent statements suggest that SBP is purchasing dollars from the local currency market to repay foreign debt and bolster reserves.
Despite the positive developments in SBP’s reserves, the reserves held by commercial banks saw a decline of $150 million, bringing the total reserves in the banking system to $16.11 billion. This robust reserve position is expected to provide stability for the Pakistani rupee in the near term. As trade agreements with countries like China and Russia increasingly favor payments in Chinese renminbi, the demand for the U.S. dollar is expected to diminish further.
The SBP’s recent update aligns with Pakistan’s broader economic goals, supported by improved remittances, higher export earnings, and stronger inflows through the Roshan Digital Account (RDA). In September, overseas Pakistanis deposited an additional $168 million through RDA, contributing to the stabilization of the reserves.
Looking forward, SBP Governor anticipates that reserves will climb to $13 billion by June 2025, as the country continues to benefit from favorable global conditions, including increased investments, a controlled current account deficit, and repayments from international partners. However, SBP’s efforts to reduce its foreign debt and replenish reserves remain critical to safeguarding long-term economic stability.
