Foreign reserves decline by $276m

Pakistan's total liquid foreign reserves decreased by $276 million due to external debt repayments, standing at $16,189.3 million as of January 17, 2025.

According to the latest data issued by the State Bank of Pakistan (SBP), reserves amounting to $11.45 billion are held by the SBP, while $4.74 billion are maintained by commercial banks.

"During the week ended on 17-Jan-2025, SBP reserves decreased by $276 million to $11,448.7 million due to external debt repayments," stated the SBP.

Experts attribute this decline to the fiscal pressures the country faces while managing foreign exchange reserves amidst external obligations.

Total reserves, comprising holdings by the SBP and commercial banks, peaked at approximately $16.5 billion toward the end of 2024, according to JS Global. However, they have declined over the last two weeks, primarily due to debt repayments.

On the other hand, reserves held by commercial banks increased from $4.2 billion in December 2024 to $4.74 billion in January 2025. Import cover, a key economic indicator, improved significantly over the past two years, rising from 1.7 months in early 2023 to 2.5 months by the end of 2024.

The sharp recovery in total reserves during the latter half of 2024 was driven by growth in SBP reserves and contributions from commercial banks. However, SBP reserves remain under pressure due to debt repayments, reflecting challenges in maintaining foreign exchange stability. The improved import cover signals greater economic stability and better foreign exchange availability for trade and financial obligations.

Meanwhile, the Pakistani rupee ended its two-day losing streak, appreciating against the US dollar in the inter-bank market on Thursday. The currency gained 0.05%, closing at 278.72, an increase of 13 paisa from the previous day's rate of 278.85, as per SBP data.

Globally, the US dollar remained steady against major currencies on Thursday, continuing a subdued trend as markets awaited clearer policy signals.

In parallel, gold prices in Pakistan experienced volatility. After a significant increase in the previous session, prices declined on Thursday. The local market saw a decrease of Rs750 per tola, bringing the price to Rs286,700, according to the All-Pakistan Gems and Jewellers Sarafa Association (APGJSA). This followed a sharp rise of Rs4,250 per tola the day before, which had pushed prices to Rs287,450. Gold remains Rs1,200 below its record high of Rs287,900 per tola.

On the global front, gold prices also fell, with rates dropping by $8 to $2,743 per ounce.

Adnan Agar, Director of Interactive Commodities, observed, "Gold prices reached a high of $2,763 today and a low of $2,742, currently trading around $2,758. The market is expected to climb further, potentially reaching $2,780 to $2,790 before a correction sets in."

He added that no significant US economic data is expected this week, with movements likely to resume next week as new data emerges. However, Agar cautioned about market unpredictability, noting the potential for volatility stemming from unexpected policy decisions.

Despite anticipated corrections, Agar reaffirmed expectations of upward momentum in gold prices, with new highs likely before adjustments occur.