Central bank forex reserves fall below $12bn on debt repayments

KARACHI: Pakistan’s foreign exchange reserves held by the central bank dropped by $228 million to $11.85 billion in the week ending December 20 due to external debt repayments, the State Bank of Pakistan (SBP) said on Thursday.

The country’s forex reserves fell by $261 million to $16.372 billion. The reserves of commercial banks decreased by $33 million to $4.518 billion.Since last month, the SBP’s reserves remained steady at $12 billion, but they have decreased as a result of repayments for external debt.

The surplus in the current account, along with the improved foreign investment inflows, helped build up the SBP’s FX reserves, despite weak official inflows.Talking about external repayments, the SBP’s governor Jameel Ahmad during an analysts’ briefing following the monetary policy meeting on December 16, said that out of a total payable amount of $26.1 billion, $10.4 billion has already been paid or rolled over. The remaining debt repayment for the fiscal year, excluding planned rollovers, stands at $5 billion.

He anticipates that the SBP’s reserves will exceed the level of $13 billion by the end of June 2025. Improvement in financial inflows under the IMF programme, along with a controlled current account surplus, stable currency and FX interventions, would help the SBP build FX reserves, said AKD Securities Limited in a report.

“We expect SBP reserves to surpass the $20 billion mark by FY27, accompanied by a significant reduction in the SBP’s forward/swap liabilities during this period,” it added.The report expects the current account balance to remain controlled due to tight monetary policy and a prudent fiscal approach amid a flexible exchange rate. This, combined with improved financial inflows -- both multilateral and bilateral -- as well as rollovers of safe deposits, would provide the SBP room to build external buffers.