KARACHI: Foreign reserves of the State Bank of Pakistan increased to $10.81 billion till 4th October against $10.704 billion in the preceding week and the state bank stated it as a three-year high through a statement on Thursday.
This increase is a point in the right direction for Pakistan’s monetary stability, recording increasing foreign investments and financial inflows. For this purpose, the government has aimed to raise the SBP’s forex holdings to as high as $13 billion by the end of FY 2025.
Most of the significant upsurge in the reserves was due to the release of the first tranche from the International Monetary Fund (IMF) under its new $7 billion Extended Fund Facility (EFF), which was agreed upon in July. The initial tranche went as high as a gross sum of over $1 billion which enabled the SBP to reach its highest reserve level in the last three years.
The main objective of the IMF program is to improve Pakistan’s economic resilience through stabilizing its balance of payments and encouraging structural reforms. The financial plan strategy by the government is aimed at raising foreign reserves while reducing vulnerabilities from external factors so as to stabilize the trend of economic growth.
The total liquid foreign exchange reserves of the country now stand at about $ 16.05 bn. Here, out of this total amount, Rs 5.24 bn is kept by commercial banks which depicts the diversified nature of Pakistan’s foreign exchange assets. The foreign exchange reserves play a highly important role for the central bank in meeting its external liabilities and helping the indigenous currency Pakistani rupee in international markets.
Though the weekly growth of $106 million in central bank reserves, the regulator has not specified reasons for the uptick. Experts attribute the latter to better remittances, export receipts, as well as strategic management of external debts.
Overall economic objectives of Pakistan are thus in line with the rise in the reserves. Building a stable macroeconomic environment, an increase in foreign direct investment, and improving the rating for credit are some of the objectives that the government is working towards. Though strong plans are in place to target $13 billion by end-FY25, authorities are eyeing policies that can aid growth in the economy as well as fiscal consolidation.
The Finance Minister’s recent remarks mark a stabilization of the foreign exchange reserves of the country as the first priority to eventually establish an economic future for Pakistan. Work in this area has been carried out on all fronts: the promotion of trade, favorable international loans through negotiations, and fiscal policies to enhance the confidence of investors are some of these. The IMF program has formed the hub of this plan because it gives Pakistan the financial package that the country needs to embark upon such urgently needed economic reform.
According to experts, in addition to sound monetary policies, the rising reserves should curb inflation and stabilize the exchange rate. The stability would go a long way in reducing the fiscal deficit of the country and then pushing for sustainable economic growth.
Where the core mission of the IMF is to supply financial aid, technical assistance is offered in different dimensions to the SBP and the Pakistani government. The partnership is aimed at rendering modernization to the country’s financial infrastructure, implementing more openness practices, and effecting economic reform lines by international best practices.
The partnership between Pakistan and the IMF is testimony to the fact that the international community has faith in the economic reform agenda of the country. As Pakistan continues to receive global financial assistance, its focus remains on creating a conducive environment for economic development and foreign investments.
The recent surge in Pakistan’s foreign exchange reserves to a three-year high is due to both strategic planning and international support. The mere fact that the government focused on taking the level of reserves to $13 billion by FY25, under its detailed vision, reflects its long-term commitment toward economic stability and growth.
All these are positive developments as Pakistan is now taking a step forward concerning financial resilience and so there will be more investor confidence as well as maintenance of stability amidst global challenges.
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