SBP buys $12.4b to strengthen reserves

The State Bank of Pakistan (SBP) carried out net foreign exchange interventions amounting to $12.4 billion between June 2024 and December 2025, underscoring an active policy stance to rebuild external buffers instead of letting the rupee appreciate against the greenback.

According to the latest data cited by Arif Habib Limited (AHL), the central bank continued its presence in the inter-bank market, including net purchases of $1.024 billion in December 2025 alone.

The intervention pattern, from data compiled by Taurus Securities, indicates that the SBP has largely been absorbing dollar liquidity from the market, a shift from earlier periods of heavy selling pressure when reserves were under stress. Analysts interpret this as a sign of improving external account dynamics, supported by stronger remittance inflows, relatively controlled imports (although rebounding), and multilateral financing under the IMF programme.

SBP governor has noted on many occasions that these purchases are aligned with the SBP's broader objective of rebuilding foreign exchange reserves without triggering excessive volatility in the rupee. By intervening opportunistically, the central bank appears to be smoothing exchange rate fluctuations while gradually strengthening its reserve position.

The data also shows that in 1HFY26 alone, the SBP bought $4.15 billion from the forex market, reflecting sustained inflows and relative stability in the balance of payments during the period.

However, economists caution that reserve accumulation remains contingent on continued external inflows and disciplined macroeconomic management, particularly amid evolving global risks such as oil price volatility and geopolitical tensions, ie, Israel-US war on Iran.

Furthermore, the Pakistani rupee posted a marginal gain against the US dollar in the inter-bank market on Tuesday, closing at 279.15, up Rs0.01 from Monday's close at 279.16.

Globally, the US dollar remained strong, heading for its biggest monthly gain since July, supported by safe-haven demand amid escalating tensions in the Middle East and rising oil prices that have heightened recession fears.

The dollar index touched 100.61, its highest level since last May, and was up 2.9% in March. The greenback gained broadly, except against the Japanese yen, where intervention concerns capped losses beyond 160 per dollar.

Meanwhile, gold prices in Pakistan rose on Tuesday in line with gains in the international market, though the metal remains on track for its steepest monthly decline since October 2008 amid inflation concerns and expectations of higher interest rates due to the Iran war.

In the local market, gold per tola increased by Rs2,800 to Rs478,762, while the rate for 10 grams rose by Rs2,401 to Rs410,461, according to the All-Pakistan Gems and Jewellers Sarafa Association. The increase follows Monday's rise of Rs3,900, highlighting continued volatility.

Globally, spot gold climbed 2.2% to $4,608.16 per ounce, hitting its highest level since March 20, while US futures gained 1.8% to $4,639. Despite the uptick, gold remains under monthly pressure as higher rate expectations dampen demand for the non-yielding asset.