SBP forex reserves hit four-month high of $11.45bn on IMF tranche

KARACHI: Pakistan’s central bank’s foreign exchange reserves rose to a four-month high of $11.446 billion as of May 16 after receiving the second tranche of $1.023 billion from the International Monetary Fund (IMF) under a $7 billion loan programme last week, the State Bank of Pakistan (SBP) said on Thursday.

The SBP’s reserves increased by $1.043 billion in the reporting week. The total liquid foreign reserves held by the country increased by $1.035 billion to $16.648 billion. However, the reserves of commercial banks fell by $9 million.

On May 9, the IMF completed the first review of a 37-month Extended Fund Facility (EFF) that the global lender agreed with Islamabad last year. This review resulted in the approval of a $1 billion disbursement for Pakistan. Additionally, the IMF approved a new loan of $1.4 billion under its climate resilience fund.

“The SBP manages to increase reserves despite record interest and dividend repatriation of $7.2 billion during the first 10 months of FY25, thanks to record remittances and resilient exports in declining commodity prices,” said Awai Ashraf, director of research at AKD Securities Limited.

“IMF inflows and rollovers from friendly nations also played a crucial role in supporting our reserves, and we expect these reserves to increase by $2.5 billion in the next two months and touch the $17 billion mark by June next year,” Awais added.

The current account surplus dropped to $12 million, a staggering 99 per cent decrease from the previous month. Year-on-year, the surplus fell by 96 per cent. During the first 10 months of FY2025, the surplus reached $1.88 billion, showing a significant improvement from a deficit of $1.33 billion during the same period last year.

The IMF’s staff report issued last week said the IMF estimates the current account deficit (CAD) for FY25 at $0.2 billion (0.1 per cent of GDP), supported by resilient exports and a stronger remittance outlook, thanks to improved macroeconomic and foreign exchange stability. Over the medium term, CAD is expected to widen modestly to about 1.0 per cent of GDP as imports recover. According to the IMF, gross reserves are projected to strengthen, bolstered by committed multilateral and bilateral financing and expected RSF disbursements of $1.3 billion. Access to commercial financing remains limited, with a small Panda bond issuance planned for FY26 and a gradual re-entry into the Eurobond/Global Sukuk market assumed for FY27.