Karachi, January 25, 2024 – Pakistan’s foreign exchange reserves witnessed a notable surge, recording an increase of $196 million in the week ended January 19, 2024.
The State Bank of Pakistan (SBP) reported the country’s total foreign exchange reserves at $13.341 billion, up from $13.145 billion in the previous week ended January 12, 2024.
While the recent uptick in reserves is a positive development, economic analysts are closely scrutinizing Pakistan’s reserve trajectory, especially as the current levels remain significantly below the robust figures observed in August 2021. This persistent decline has raised concerns, prompting a deeper investigation into the contributing factors.
The SBP’s official foreign exchange reserves experienced a substantial boost, increasing by $243 million to reach $8.27 billion by the week ended January 19, 2024, compared to $8.027 billion in the prior week. The central bank attributed this increase to multiple factors, highlighting the receipt of an International Monetary Fund (IMF) tranche under the Stand-By Arrangement (SBA) and the execution of the government’s external debt repayments during the same period.
Providing insight into the dynamics behind the surge, the SBP clarified that after accounting for all financial flows, its reserves recorded a net increase of $243 million, reaching a total of $8,270.5 million by the end of the week. The utilization of IMF funds and the timely execution of debt repayments played a crucial role in bolstering the central bank’s reserves.
Conversely, the foreign exchange reserves held by commercial banks experienced a decline of $47 million during the same period. According to the SBP’s report, commercial banks’ reserves reached $5.07 billion by the week ended January 19, 2024, down from $5.118 billion in the previous week.
The decrease in commercial banks’ reserves could be attributed to various factors, including increased demand for foreign currency, trade imbalances, and potential fluctuations in international markets. Economic experts are closely monitoring these trends to gauge the overall stability of Pakistan’s financial landscape.
Pakistan’s reliance on external financing, including loans from international organizations like the IMF, emphasizes the importance of maintaining a balance between borrowing and building sustainable reserves. The country’s economic policymakers face the challenge of navigating a delicate equilibrium to ensure financial stability while meeting debt obligations.
As Pakistan navigates the complexities of its economic landscape, stakeholders will be keenly observing future developments in foreign exchange reserves. The government’s commitment to implementing prudent fiscal policies and managing external debt responsibly will play a crucial role in determining the trajectory of the country’s reserves in the coming months.
