SBP forex reserves jump to $9.4bn, hit near 2-year high

KARACHI: Pakistan’s foreign exchange reserves held by the central bank reached a near two-year high of $9.4 billion as of June 28, their highest level since July 2022, data from the State Bank of Pakistan showed on Thursday.

The SBP’s forex reserves surged by $5 billion in the fiscal year 2023-24, increasing from $4.4 billion in the previous fiscal year. This growth is attributed to rigorous fiscal and monetary policies, as well as the successful completion of the International Monetary Fund loan programme. The SBP also stated that on a weekly basis, its reserves increased by $494 million due to official inflows from multilateral agencies. However, the specific multilateral partners from which the country received inflows last week were not disclosed by the central bank.

The country’s forex reserves rose by $366 million to $14.573 billion in the week ending June 28. However, the reserves of commercial banks dropped by $128 million to $5.184 billion.During FY24, the country saw an increase of $5.413 billion in its reserves. The commercial banks’ reserves surged by $469 million in the last fiscal year.

Awais Ashraf, the director research at AKD Securities Limited said the central bank reserves climbed driven by strict fiscal and monetary policies and the successful completion of the IMF programme.“The SBP reserves now exceed the IMF’s target of $9 billion for the fiscal year 2024 closing,” Ashraf said.

“The increase in reserves was supported by the SBP’s foreign exchange purchases, which helped offset ongoing debt service payments and a reduction in the SBP’s swap/forward book,” he added.

Despite more than doubling, SBP reserves still cannot cover two months of import bill, he said.“We believe that increasing inflows into the capital markets, particularly the debt market, along with the government tapping into commercial financing amid tight fiscal and monetary policies, will help further build foreign exchange reserves.”

The latest forex figures were released after the government stated that it had fulfilled all IMF requirements in its annual budget. It is now aiming to secure a staff-level agreement with the global lender for a new, larger loan programme of over $6 billion this month.