Foreign exchange reserves reach 26-month high

KARACHI:

Pakistan's foreign exchange reserves held by the State Bank of Pakistan (SBP) rose by $33 million, reaching a 26-month high of $9.43 billion for the week ending August 30, 2024, according to the central bank's latest update.

The continued growth in reserves over the past six weeks has bolstered the domestic currency, which appreciated by Rs0.10 to Rs278.67 against the US dollar in the interbank market, reversing a recent downward trend. The rupee had previously closed at a five-month low of Rs278.77 on Wednesday.

Cumulatively, the SBP's reserves have increased by $409.6 million over the past six weeks, returning to levels last seen in July 2022. While the central bank has not provided specific reasons for the increase, officials previously indicated they were purchasing US dollars from the local market to boost reserves. The central bank's strategy has been supported by robust inflows from workers' remittances and growing export earnings, which have kept the supply of US dollars higher than the demand for imports. SBP projections suggest that reserves could reach $13 billion by the end of the current fiscal year in June 2025.

On the downside, foreign exchange reserves held by commercial banks declined by $69.8 million, settling at $5.30 billion. Consequently, the country's total reserves dropped by $36.4 million, reaching $14.73 billion in the week ending August 30, down from a 26-month high of $14.77 billion the previous week. The recent decline in international oil prices has further supported the local currency, as Pakistan remains heavily reliant on imported energy.

Financial experts predict that the currency will remain stable around current levels through December 2024, as it has held steady over the past five months. In the open market, the Exchange Companies Association of Pakistan (ECAP) reported the rupee remained stable at Rs280.25/$ for the second consecutive day.