Foreign exchange reserves held by the State Bank of Pakistan (SBP) have surpassed the December 2025 benchmark, supported by inflows from the International Monetary Fund and continued foreign exchange purchases from the market, even as overall external financing remains subdued.
According to the central bank, SBP-held reserves have exceeded the targeted level of USD 15.5 billion for December 2025, reaching more than USD 15.8 billion as of December 12. The buildup has been achieved despite relatively weak net inflows on the financing side, reflecting a cautious but steady improvement in Pakistan’s external position.
The increase in reserves was primarily driven by the receipt of USD 1.2 billion from the IMF following the successful completion of reviews under the Extended Fund Facility (EFF) and the Resilience and Sustainability Facility (RSF). In addition, the SBP has continued purchasing foreign exchange from the interbank market, contributing to reserve accumulation.
In its latest assessment, the central bank confirmed that Pakistan received the IMF tranche earlier this month, reinforcing external buffers at a time when global financial conditions remain tight. Looking ahead, the SBP projects that with the realization of planned official inflows, its foreign exchange reserves will rise further to USD 17.8 billion by June 2026.
Speaking during an analyst briefing after the Monetary Policy Committee meeting, SBP Governor Jameel Ahmed said that stronger government inflows are expected in the second half of FY26. As of December 12, official government inflows amounted to USD 2.1 billion, of which USD 1.2 billion came from the IMF. The Governor indicated that the bulk of remaining planned inflows are expected to materialize between January and June FY26.
He also shared details on Pakistan’s external debt obligations, stating that total debt repayments for FY26 stand at USD 25.8 billion. Of this amount, USD 9.7 billion has already been paid or rolled over. For the remainder of the fiscal year, the net repayable amount is USD 6.9 billion, excluding any future rollovers, highlighting the importance of sustained inflows and prudent reserve management.
On exchange rate management, Governor Ahmed noted that SBP’s foreign exchange interventions remained on the lower side during the first two months of FY26 but increased in subsequent months, approaching the average levels observed last year. This suggests a more active role by the central bank in managing market liquidity as conditions evolved.
Meanwhile, the latest Monetary Policy Statement provided insights into domestic monetary trends. Broad money (M2) growth accelerated to 14.9 percent as of November 28, largely driven by increased net budgetary borrowing from the banking system. This expansion reflects fiscal financing needs alongside evolving monetary conditions.
Private sector credit recorded an expansion of Rs187 billion during the July–November period, supported by borrowing from key sectors including textiles, wholesale and retail trade, and chemicals. Consumer financing also remained robust, particularly automobile loans, benefiting from easing financial conditions, improved consumer sentiment and a relatively stable macroeconomic backdrop.
However, on a year-on-year basis, private sector credit growth declined by 0.3 percent. The SBP attributed this contraction mainly to a high base effect, stemming from the extraordinary credit expansion witnessed in the second quarter of FY25 due to the advance-to-deposit ratio (ADR) driven lending surge.
On the liability side, currency in circulation remained broadly unchanged during the period, while growth in bank deposits led to a moderate decline in the currency-to-deposits ratio. This shift indicates gradual improvement in financial intermediation and depositor confidence within the banking system.
Overall, the latest reserve data and monetary indicators suggest a cautiously improving external and domestic financial environment. While challenges remain on the financing front, the SBP’s reserve accumulation, IMF support and expectations of stronger inflows in the second half of FY26 provide some reassurance on Pakistan’s near-term external stability trajectory.
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