The State Bank of Pakistan (SBP) has acquired $5.5 billion from the banking market in the first seven months of the fiscal year 2024-25. These dollar purchases, part of the SBP’s regular currency market interventions, show a steady increase each month. The central bank’s dollar buying activity included significant amounts such as $1.026 billion in October and $946 million in September. However, the SBP’s total dollar purchases are expected to surpass the country’s IMF borrowing over the next three years.
Despite these efforts, Pakistan’s foreign exchange reserves have decreased by over $500 million in the past week. As of last week, the reserves fell to a six-month low of $10.6 billion. This signals ongoing vulnerabilities in the country’s foreign exchange position and highlights the need for more effective policy management.
In addition to the dollar purchases, Pakistan is expected to receive over $35 billion in remittances this year, along with inflows from the IMF and World Bank. Remittances in the first eight months of FY25 have already exceeded last year’s total by $6 billion. However, experts argue that managing these inflows effectively remains a challenge, especially with Pakistan’s large debt servicing requirements of around $25 billion annually.
The country’s financial experts stress the importance of a strategy to handle these massive inflows, which, despite their size, are still insufficient to cover growing external liabilities. The current account remains in surplus, but the sharp decline in reserves remains a major concern for Pakistan’s economic stability.