SBP forex reserves fall by $252m to $11.17bn due to debt payments

KARACHI: Pakistan’s central bank foreign exchange reserves decreased by $252 million to $11.17 billion during the week ended February 7 because of external debt repayments, it said in a statement on Thursday.

Total liquid foreign reserves held by the country dropped by $181 million to $15.863 billion. However, the reserves of commercial banks increased by $70 million to $4.696 billion. Pakistan’s external account has improved due to a surge in remittances and improved exports. However, external debt repayments put pressure on the forex reserves. The SBP’s reserves are enough to cover over two months of imports.

Fitch Ratings, a credit rating agency, stated in its latest commentary that strong remittance inflows, robust agricultural exports, and tight policy measures have allowed Pakistan’s current account to achieve a surplus of approximately $1.2 billion (over 0.5 per cent of GDP) in the six months to December 2024, compared with a similar-sized deficit in FY24. Reforms in the foreign exchange market during 2023 also facilitated this shift.

However, Fitch noted that Pakistan’s forex reserves remain low relative to its funding needs. The country’s external financing needs will remain significant in the coming year. The South Asian nation is required to repay over $22 billion in external debt during the current fiscal year, which includes nearly $13 billion in bilateral deposits, it said.

Saudi Arabia rolled over $3 billion in deposits in December, and the UAE $2 billion in January.

Remittances to Pakistan surged by 32 per cent to $20.8 billion in the seven months of fiscal year 2025. In January alone, money sent from abroad reached $3 billion, a 25 per cent increase from last year. However, remittances fell by 2.5 per cent compared with the previous month.

Analysts expect Pakistan to see a fourth consecutive current account surplus in January, driven by sustained remittances and a lower trade gap. Recent data from the Pakistan Bureau of Statistics indicates that the trade deficit dropped to $2.313 billion in January, a decrease of 5.5 per cent from the previous month.