SBP’s Foreign Reserves Drop by $143 Million, Reaches $11.7 Billion

The latest data from the State Bank of Pakistan (SBP) reveals a decline of $143 million in the country’s foreign reserves, bringing the total to $11,710.5 million. This drop is primarily attributed to external debt repayments.

H2: Breakdown of Pakistan’s Foreign Reserves

As of December 27, 2024, Pakistan’s total liquid foreign reserves stood at $16,408.7 million. The SBP’s portion of these reserves is $11,710.5 million, while commercial banks hold the remaining net reserves of $4,698.2 million. This shift highlights the importance of maintaining both domestic and external liquidity in challenging economic conditions.

H3: Causes Behind the Decline in Foreign Reserves

The reduction in reserves is a result of significant external debt repayments. Pakistan’s foreign debt obligations for the fiscal year 2025 are estimated at $26.1 billion, with $22.1 billion allocated to principal repayments and $4 billion for interest payments.

H2: Impact of Monetary Policy Decisions on the Reserves

Recently, the SBP’s monetary policy committee (MPC) reduced the policy rate by 200 basis points, bringing it down to 13%. The MPC highlighted that Pakistan’s external debt obligations would reach $26.1 billion for FY25, with most of this amount being rolled over or refinanced.

H3: Rollovers and Refinancing Strategy

To address this, Pakistan has already repaid or rolled over $10.4 billion, including a rollover of $5.4 billion. With further rollovers expected in the upcoming months, the remaining debt is projected to be repaid gradually. Around $5 billion of external debt is scheduled for repayment during the remainder of FY25.

H2: Projected Outlook for SBP’s Reserves by FY25

Despite the recent dip in reserves, experts remain optimistic about the SBP’s reserve targets. According to AHL (Arif Habib Limited), the SBP’s reserves are expected to exceed $13 billion by the end of FY25. This represents an increase of around $900 million from the current level of $12.1 billion. This forecast is based on expected rollovers and refinancing efforts by the government and the SBP.

H3: Meeting Foreign Debt Obligations

The government of Pakistan is on track to meet its foreign debt obligations for FY25, which are estimated at around $26 billion. The plan involves securing rollovers and refinancing for approximately $16-17 billion, leaving a net repayment of around $5.5 billion for the second half of the fiscal year.

H2: Pakistani Rupee Depreciates Slightly Against the US Dollar

In the first trading session of 2025, the Pakistani rupee depreciated slightly by 0.03% against the US dollar. The rupee lost 9 paisa, bringing the exchange rate to 278.64 against the dollar. On the previous day, the currency had closed at 278.55.

H3: Currency Exchange Trends and Market Insights

Despite the small depreciation, the rupee’s performance remains stable, given the challenging global economic environment. Exchange Companies Association of Pakistan Secretary General Zafar Paracha highlighted the role of exchange companies in managing currency volume and contributing to Pakistan’s foreign reserves. Exchange companies managed a total volume of approximately $7 billion in 2024, playing a vital role in supporting the nation’s economic progress.

H2: The Role of Exchange Companies in Strengthening Foreign Reserves

In 2024, exchange companies provided $3.85 billion to the inter-bank market, bolstering Pakistan’s foreign reserves. This move was crucial in maintaining the nation’s liquidity and supporting economic activities such as international travel, tuition fees, and medical treatments abroad.

H3: Local Gold Prices Surge Amidst International Trends

In addition to the fluctuations in the rupee, Pakistan also witnessed an increase in gold prices. The price of gold per tola in Pakistan rose to Rs 274,700, reflecting a single-day rise of Rs 1,100. This increase mirrors a rise in international gold prices, making gold a popular investment option in times of uncertainty.

H2: The Outlook for Pakistan’s Economy in 2025

Pakistan’s economic landscape in 2025 presents both challenges and opportunities. While the reduction in reserves may raise concerns, the government’s plans to manage external debt obligations and secure refinancing are expected to stabilize the economy in the long term.

H3: Key Economic Indicators for 2025

The government is focusing on achieving a balance between external debt management, monetary policy adjustments, and economic growth. A key area of focus will be meeting external debt obligations while managing inflation and ensuring the stability of the national currency.

FAQs

Q1: What caused the decline in Pakistan’s foreign reserves?

The decrease in foreign reserves by $143 million is mainly due to external debt repayments, a significant portion of which is related to principal and interest payments.

Q2: How much are Pakistan’s foreign debt obligations for FY25?

Pakistan’s foreign debt obligations for FY25 are estimated at $26.1 billion, with $22.1 billion allocated to principal repayments and $4 billion for interest payments.

Q3: What is the role of exchange companies in Pakistan’s economy?

Exchange companies contribute to Pakistan’s foreign reserves by handling a large volume of currency exchanges, supporting economic activities such as international travel, education, and medical expenses.

Q4: What is the forecast for Pakistan’s foreign reserves in FY25?

Pakistan’s foreign reserves are expected to exceed $13 billion by the end of FY25, based on expected rollovers and refinancing efforts.

Q5: How has the Pakistani rupee performed recently against the US dollar?

In the first trading session of 2025, the Pakistani rupee depreciated slightly by 0.03%, losing 9 paisa against the US dollar.

MUST READ

https://skipper.pk/2025/01/03/veon-group-investment-mobilink-bank-msme-financing-digital-banking/