Pakistan’s foreign reserves stand at $16.1 billion as of October 11, 2024, with the State Bank of Pakistan, showing that more than a two-year high the PKR rose to an unmatched level. The reserves increased by an impressive $64 million during the reporting week.
The SBP’s reserves actually increased by $215 million to a level of $11.02 billion, its highest since April 2022. This is significant as the SBP’s reserves are now amply sufficient to meet over two months’ worth of imports, providing a much-needed cushion for the economy even as persistent stressors continue.
The increase in forex reserves can mostly be attributed to the first tranche of $1.03 billion that arrived from the International Monetary Fund (IMF) under the Extended Fund Facility worth $7 billion last month. This infusion has been very significant to the economy as far as investor confidence is concerned and for stabilizing the economy at large.
Moreover, reduction in the current account deficit has also been a significant step to continue forex reserve boosting. The contributing factors to make this decrease possible are good remittances through overseas Pakistanis, better performance in exporting, and healthy inflows through the Roshan Digital Account. All these aspects have bolstered the foreign currency position of the country.
The latest IMF staff report reveals the need to go on rebuilding foreign exchange reserves towards a minimum cushioning level against at least three months of imports. The current account deficit has been forecasted at $3.57 billion FY25 against Pakistan’s GDP which stands at 0.9%. The gross financing requirement for FY25 has been estimated to decline to $18.8 billion, the lowest in nine years.
Historically, the average gross financing requirement over the last nine years has been around $25 billion. Declining financing requirements owe much to contained current account deficits and smaller repayment obligations, which should sum to $15.2 billion in FY25.
Pakistan’s overall liquid foreign exchange reserves were $16.11 billion as of October 11. It’s an increase for SBP and down by $150 million for commercial banks, whose reserves now slide to $5.089 billion. At the current levels, the reserves might just suffice for two months of import, which signals cautiously optimistic light on the economic outlook for Pakistan.
It is hoped that with continued oversight and good management of these reserves, Pakistan will be able to surmount its fiscal problems and perform towards long-run economic stability.
To Read More: Finance