Pakistan’s foreign exchange reserves held by the State Bank of Pakistan (SBP) declined by $276 million, reaching $11.449 billion during the week ending January 17, the central bank reported on Thursday. The drop was attributed to external debt repayments. Despite the decline, the SBP’s reserves remain sufficient to cover over two months of imports.
The country’s total foreign exchange reserves also fell by $262 million, standing at $16.189 billion. However, reserves held by commercial banks saw a slight increase of $15 million, reaching $4.741 billion.
While external debt repayments continue to exert pressure on reserves, Pakistan’s external account has shown improvement, supported by the $7 billion International Monetary Fund (IMF) loan program. During the first half of the fiscal year 2025 (July-December), the country recorded a current account surplus of $1.2 billion, a significant turnaround from the $1.397 billion deficit in the same period last year. This improvement was driven by higher remittances and exports.
However, the outflow of profits and dividends from foreign investments surged by 114% to $1.215 billion during the first half of the current fiscal year (January-December). To conserve foreign exchange reserves, the repatriation of profits was largely restricted in the previous fiscal year.
In a positive development, the United Arab Emirates (UAE) recently rolled over $2 billion in deposits with the SBP for another year, providing some relief as the deposits were set to mature this month. Despite this, Pakistan’s medium-term solvency remains dependent on continued IMF support and inflows from other lenders. The IMF estimates that Pakistan’s external financing needs, including debt repayments and the current account deficit, will average $22 billion annually through fiscal 2028.
Finance Minister Muhammad Aurangzeb also announced that Pakistan has finalized terms for a $1 billion loan from two Middle Eastern banks at an interest rate of 6-7%.
