SBP reserves continue to rise

Touch new 26-month high at $9.46b, help rupee recover

KARACHI:

Pakistan's foreign exchange reserves, held by the State Bank of Pakistan (SBP), further rose by $30 million, hitting a new 26-month high at $9.46 billion in the week ended September 6, 2024, according to the central bank's weekly update released on Thursday.

The consistent increase in foreign currency reserves over the past seven weeks helped the Pakistani rupee appreciate Rs0.10 on a day-on-day basis to a two-week high at Rs278.44 against the US dollar in the inter-bank market.

The local currency has maintained its uptrend since touching the five-month low at Rs278.77/$.

The SBP's foreign exchange reserves have cumulatively surged $439.6 million in the last seven weeks, which took them back to July 2022 levels, according to the central bank data. The bank has replenished its reserves through buying US dollars from the local currency markets.

Speaking at an analyst briefing on the monetary policy statement issued on Thursday, SBP Governor Jameel Ahmad was quoted as saying that the bank had bought a net $573 million worth of US dollars in June 2024. He projected that the SBP reserves would surge to $12 billion by March 2025.

The supply of foreign currency has remained higher than its demand for imports in the banking system. The central bank is buying surplus dollars to repay the country's maturing foreign debt and boost its reserves.

Robust workers' remittances and increasing export earnings have continued to keep inflows of the greenback higher than its demand, though imports are projected to grow in the coming months.

The SBP projected in July that its reserves would soar by $4 billion to $13 billion by the end of current fiscal year in June 2025.

According to the central bank's weekly update, the foreign exchange reserves held by commercial banks increased by $26.4 million on a week-on-week basis, settling at $5.32 billion.

Accordingly, the country's total reserves surged by $56.2 million to a new 26-month high at $14.79 billion.

In addition to the uptick in reserves, there were reports that Pakistan had approached Saudi Arabia for an oil import facility of $1.2 billion to address the shortfall in foreign financing, which was a condition of the International Monetary Fund (IMF) for approval of its new loan programme.

This development, coupled with the fall in international crude oil prices, provided support to the rupee as the country heavily relied on imported energy supplies.

The Exchange Companies Association of Pakistan reported that the local currency remained stable at Rs280.85/$ in the open market for the second consecutive day.