The State Bank of Pakistan has successfully increased its foreign exchange reserves to a 39-month high, reaching $14.5 billion by the close of fiscal year 2025. This build-up was largely driven by hefty official inflows and consistent dollar buying from the interbank market, according to data released by the central bank on Thursday.
During the week ending July 4 alone, the SBP managed to add $1.77 billion to its reserves. Although the central bank did not disclose a detailed breakdown of these inflows, bankers and market participants attributed the sharp accumulation to a mix of official financing and proactive currency market operations.
In total, bankers estimate that the SBP purchased over $8 billion from the interbank market during FY25. This aggressive buying was made possible by record-high worker remittances, which climbed to $38.3 billion for the year, cementing Pakistan’s position among the top remittance-receiving countries globally.
Much of this remittance strength came on the back of incentives the government had extended to banks to encourage inflows through formal channels. However, these incentives are now under review, with authorities weighing whether to scale them back, although no final decision has been made.
Throughout FY25, the SBP also maintained a strict watch over dollar outflows. This was especially evident in the final quarter, when importers repeatedly struggled to secure foreign exchange for their shipments. By tightly managing the availability of dollars for import payments, the central bank helped preserve reserves, even if it added friction to trade financing and slowed the release of goods at ports.
Some currency dealers noted that in a bid to attract even more remittance flows, banks offered overseas Pakistanis rates that often exceeded the official interbank quotes. The strategy aimed to capitalise on per-transaction incentives, pulling additional dollars into the banking system.
Meanwhile, the exchange rate continued to show upward movement. On Thursday, the Exchange Companies Association of Pakistan reported the rupee closing at Rs284.76 against the dollar in the interbank market, up by 10 paise from the previous day. In the open market, the rate rose by 50 paise to settle at Rs287.50. This happened despite the US dollar weakening on the global stage, retreating from a two-week high against other major currencies.
Looking ahead, analysts believe that if the trend of robust remittance inflows persists, along with smooth external debt rollovers and stable engagement with the International Monetary Fund, Pakistan’s reserves could potentially touch the $20 billion mark by the end of FY26. This optimism is also bolstered by Pakistan’s relatively easy access to commercial borrowing during FY25, made possible by the comfort lenders derive from the country’s adherence to the IMF programme.
As of July 4, Pakistan’s overall foreign exchange reserves stood at $20.028 billion. This figure includes $5.526 billion held by commercial banks, as reported by the SBP. The healthy rise in reserves sends a clear signal to markets and international creditors about Pakistan’s improving ability to manage its external payments, even as challenges around debt repayments and import needs continue to loom.
By sustaining this careful balance of attracting inflows, managing outflows, and maintaining international lender confidence, the SBP appears set on a path to bolster economic stability in the new fiscal year, aiming to shield the country from external shocks and exchange rate volatility.