Pakistan’s foreign reserves climb to record $26.86bn despite Gulf war headwinds
File photo: the State Bank of Pakistan's historic building on I.I. Chundrigar Road, Karachi, now the State Bank Museum.
KARACHI: Pakistan’s foreign exchange reserves have climbed to a record high of more than $26.8 billion, the State Bank reported on Thursday, an unlikely milestone for an economy still absorbing the shock of the Gulf war that began in late February.
SBP reserves rise for a third week
Total liquid reserves reached $26,864.5 million in the week ended October 30, up $110 million from $26,754.2 million a week earlier. The State Bank’s own holdings rose $39 million to $21,561.2 million — the third weekly increase in a row — while commercial banks added $71 million to hold $5,303.3 million. The central bank’s reserves stood at just $16.568 billion in February. Since the war began on February 28, it has added more than $5 billion.
Room to steady the rupee
The financial sector considers the current level sufficient to keep the exchange rate stable and to encourage exporters to bring their proceeds home without delay, while a steady rupee also gives importers confidence to plan ahead. The reserves now cover nearly four months of imports — 3.93 months, according to Topline Securities, marginally up from 3.92 months a week earlier.
Trade gap still widening
Currency experts, though, caution that the rupee is overvalued, letting importers buy cheaper dollars and pushing the trade deficit wider every month. The deficit reached $14.6 billion in July–October of the current fiscal year, with imports of $26 billion against exports of $11.4 billion. Remittances keep growing each year, but the government and the central bank have devised no policy to put them to better use; instead, they are used to plug the trade gap.
The road ahead
State Bank Governor Jameel Ahmed has said the central bank aims to build its reserves to $23 billion by December 2026 and $25 billion by June 2027. Finance Minister Muhammad Aurangzeb said on Wednesday that Saudi Arabia has rolled over its $3 billion deposit and that the IMF’s executive board will meet in December to approve a $1.2 billion disbursement. Since June, the State Bank’s reserves have risen by $3.18 billion.
