Reserves hit 26-month high as rupee strengthens

Pakistan's foreign exchange reserves, held by the State Bank of Pakistan (SBP), increased by $43 million, reaching a 26-month high of $9.51 billion in the week ending September 13, 2024, according to the central bank's latest weekly update.

This rise coincided with the domestic currency strengthening to a five-and-a-half-month high of Rs277.91 against the US dollar in the interbank market, extending its winning streak for the seventh consecutive day.

SBP data shows that foreign exchange reserves have risen for eight straight weeks, cumulatively increasing by $482.6 million over the past two months, returning reserves to July 2022 levels. The central bank has bolstered reserves through dollar purchases from the local currency markets.

During an analysts' briefing, SBP Governor Jameel Ahmad noted that the bank bought $573 million in June 2024 and expects reserves to reach $12 billion by March 2025. A higher supply of foreign currency, driven by robust remittances and increasing exports, has enabled the central bank to boost reserves while meeting foreign debt obligations.

In July, the SBP projected reserves would rise to $13 billion by June 2025.

Despite a $12.6 million drop in commercial bank reserves in the week of September 13, the country's total reserves rose by $30.4 million, hitting $14.82 billion.

The current account surplus of $75 million in August and the US Federal Reserve's interest rate cut have also supported the rupee's strength. The Exchange Companies Association of Pakistan reported the rupee stable at Rs280.70 in the open market.