SBP forex reserves rise by $75m to $9.1bn

KARACHI: Pakistan’s foreign exchange reserves held by the central bank increased by $75 million to $9.1 billion in the week ending July 26, the State Bank of Pakistan reported on Thursday.

The country’s foreign exchange reserves rose by $56 million to $14.39 billion. However, the reserves of commercial banks fell by $19 million to $5.29 billion.The SBP did not mention a reason for the slight reserve increase in its weekly statement. However, Central Bank Governor Jameel Ahmad stated at the media and analyst briefing after the monetary policy meeting on Monday that the improvement in the current account deficit brought about by an increase in exports and remittances, whereas the revival of financial inflows contributed to the buildup of the SBP’s foreign exchange reserves.

The governor anticipated that Pakistan’s external debt obligations would be managed comfortably and timely because of improving foreign fund inflows and manageable current account deficits.

The State Bank of Pakistan projects that its foreign exchange reserves will reach $13 billion by the end of FY25, up from the current $9.1 billion. The SBP also believes that the quality of these reserves is better than in previous years.

Over the past two and a half months, Pakistan has received dollar inflows totalling over $500 million. Analysts said that foreign investors are purchasing high-yielding Pakistani T-bills because they believe the long-term International Monetary Fund programme will keep the local currency stable.

According to the latest SBP data, Pakistan will need $4.98 billion in July, $2 billion in August and September, and $17.8 billion from October to June, bringing the total amount to $24.8 billion to fund its external payment obligations for the entire FY25.

The global rating agency, S&P, affirmed Pakistan’s long-term sovereign rating as ‘CCC+’. This was due to the country’s reliance on external aid to meet its debt obligations amidst a prolonged economic crisis.

Fitch had on Monday upgraded Pakistan’s long-term foreign currency issuer default rating to ‘CCC+’, due to greater availability of external funding under the new IMF deal.Earlier in July, Pakistan secured a $7-billion bailout deal with the IMF to stabilize the economy, as the country was on the brink of a sovereign default. Additionally, Pakistan is in discussions with Saudi Arabia, the United Arab Emirates and China to meet gross financing needs under the IMF programme.