Forex reserves rise $29m to $11.29b

Foreign currency deposits have surged $2.19b in four months

KARACHI:

With the latest weekly surge of $29 million, Pakistan's foreign exchange reserves, held by the State Bank of Pakistan (SBP), have cumulatively risen $2.19 billion in the past four months, reaching a more than 31-month high at $11.29 billion by November 15, 2024.

The spike in foreign currency deposits suggested that the supply of US dollars remained higher, which helped the local currency to stay below Rs278/$ on Thursday.

The rupee ticked up Rs0.08 to Rs277.96 against the greenback in the inter-bank market. It had closed at a two-month low at Rs278.04/$ on Wednesday.

According to the central bank data, the foreign exchange reserves have continued to surge over the past 17 consecutive weeks. They have maintained a non-stop winning streak despite the recent repayment of $1 billion in foreign debt.

The central bank has bolstered its reserves by purchasing dollars from local currency markets owing to ample supply of foreign currency through robust workers' remittances and the improvement in exports.

Out of the surge of $2.19 billion, almost half came in the wake of receipt of the first International Monetary Fund (IMF) loan tranche of $1.03 billion in late September.

Inflows of remittances hit a four-month high of $3.10 billion in October, maintaining the average of $3 billion a month in the first four months of the current fiscal year compared to $2.5 billion a month in FY24.

Finance Minister Muhammad Aurangzeb has projected that remittances will grow 12% to $34 billion in FY25, up from $30.25 billion in FY24.

SBP Governor Jameel Ahmad and Aurangzeb both expect the foreign currency reserves to reach $13 billion by the end of current fiscal year on June 30, 2025.

A further increase beyond the estimates may be possible after the IMF hinted at providing $1 billion in climate financing to Pakistan.

Meanwhile, the foreign currency reserves held by commercial banks dropped $27 million to $4.68 billion in the week ended November 15. Accordingly, the country's total reserves rose $2.2 million to $15.97 billion.

According to the central bank, the rupee had lost Rs0.37 in the prior three days to a two-month low at Rs278.04/$ on Wednesday.

Exchange Companies Association of Pakistan reported that the rupee regained Rs0.05 on a day-on-day basis in the open market, closing at Rs278.94/$.

The recovery in the currency was seen after the IMF hinted at providing climate financing of $1 billion.

Earlier, the Asian Development Bank (ADB) announced that it would lend $500 million to Pakistan. Similarly, Azerbaijan was poised to invest $3 billion, which would help the rupee remain stable.

The local currency has largely remained steady in the range of Rs277-279/$ over the past 10 months and is anticipated to stay around current levels till the end of December.