SBP’s forex reserves rise by $43m to $9.5bn

KARACHI: Foreign exchange reserves held by the central bank increased by $43 million to $9.509 billion in the week ending September 13, the State Bank of Pakistan (SBP) reported on Thursday.

The country’s foreign exchange reserves rose by $30 million to $14.827 billion. However, the reserves of commercial banks dropped by $13 million to $5.317 billion.Foreign reserves remained stable due to improvements in the current account balance, despite external debt repayments.

After three months of deficits, Pakistan’s current account swung back to a surplus in August, mostly because of strong remittances.Data from the SBP on Wednesday showed that the country recorded a current account surplus of $75 million, compared with a deficit of $246 million in the previous month and a shortfall of $152 million in August 2023.

In the first two months of fiscal year 2025, Pakistan posted a current account deficit of $171 million, down 81 per cent from a year ago.This surplus provides some relief to Pakistan, which is expecting approval from the executive board of the International Monetary Fund for its new $7 billion loan programme at the meeting scheduled for September 25. The IMF’s supported 37-month extended fund facility (EFF) is crucial for the country’s medium-term external stability.

Remittances increased to $2.9 billion in August, up 40 per cent from a year earlier. These inflows rose by 44 per cent to $5.9 billion in July-August FY25. However, remittances fell by 2.0 per cent on a month-on-month basis in August.

In a post-monetary policy analysts briefing last week, the SBP’s governor Jameel Ahmad stated that he expects the momentum of remittances to continue due to a lower spread between the formal and informal markets.

He also anticipates that the current account deficit will stay within the projected range of zero to 1.0 per cent of the GDP in FY25. This contained current account deficit, combined with the expected inflows under the IMF programme, is expected to further strengthen the SBP’s foreign exchange reserves.According to the governor, the central bank’s foreign exchange reserves are projected to reach $12 billion by March 2025 and $13 billion by June 2025.