SBP forex reserves rise by $16m to $9.4bn

KARACHI: Pakistan’s foreign exchange reserves held by the central bank increased by $16 million to $9.405 billion in the week ending July 5, the State Bank of Pakistan said on Thursday.

The country’s total foreign exchange reserves rose by $71 million to $14.64 billion. The reserves of commercial banks increased by $56 million to $5.24 billion.The tight fiscal and monetary policies and the successful completion of the International Monetary Fund loan programme helped the SBP shore up its reserves. The SBP’s forex reserves surged by $5 billion in the fiscal year 2023-24.

The rise in reserves was supported by the SBP’s foreign exchange purchases, which helped offset ongoing debt service payments and a reduction in the central bank’s swap/forward book.

However, analysts have pointed out that despite more than doubling, the SBP reserves are still not sufficient to cover two months of the import bill. According to analysts, increasing inflows into the capital markets, especially the debt market, and the government’s utilization of commercial financing despite strict fiscal and monetary policies, will further contribute to the build-up of foreign exchange reserves.

The rise in workers’ remittances also supported the forex reserves. These inflows saw a 44 percent annual growth in June 2024, reaching $3.2 billion. Remittances from Pakistani citizens employed abroad increased by 11 per cent to $30.3 billion in FY24.

If more dividend repatriation is permitted to clear the backlog, the current account may be in surplus or just slightly negative in June, despite a comparatively higher trade deficit.The latest forex figures were released after the government stated that it had fulfilled all IMF requirements in its annual budget. It is now aiming to secure a staff-level agreement with the global lender for a new, larger loan programme of over $6 billion this month.