Pakistan’s foreign exchange reserves held by the State Bank of Pakistan (SBP) witnessed a notable increase of $131 million in the week ending November 22, 2024, bringing the total reserves to $11.419 billion. This marks the highest level since March 2022, representing a 31-month peak. The SBP’s data, released on Thursday, highlighted the resilience of the central bank’s reserves amidst ongoing economic adjustments.
The rise in reserves underscores a positive development for Pakistan’s foreign currency position, which has been under scrutiny due to economic challenges and external obligations. The increase from $11.288 billion on November 15 reflects the government’s efforts to stabilize the country’s foreign exchange reserves and boost economic confidence.
Total Foreign Currency Reserves
In addition to the SBP’s reserves, the overall liquid foreign exchange reserves held by Pakistan, including deposits held by commercial banks, stood at $16.076 billion as of November 22. This reflects an increase of $109 million from the previous week, indicating an overall improvement in the country’s foreign currency position.
However, while the central bank’s reserves saw a significant uptick, net reserves held by commercial banks declined. According to the SBP’s data, commercial banks’ reserves fell by $22 million, bringing their total to $4.658 billion during the same period.
Implications for Economic Stability
The latest increase in SBP reserves provides much-needed breathing space for Pakistan, which has faced significant challenges in managing its external obligations. Higher reserves improve the country’s ability to meet international debt repayments, finance imports, and stabilize the currency market.
Economic experts suggest that the uptick could be attributed to inflows from multilateral institutions, remittances, and export proceeds. Additionally, improved economic confidence following structural reforms and stabilization measures has likely contributed to this reserve build-up.
Despite these gains, challenges remain. The decline in commercial bank reserves indicates some liquidity pressures within the private banking sector. Managing this balance between central and commercial reserves will be crucial for sustaining long-term economic stability.
Historical Context
The current level of reserves is the highest recorded since March 2022, a period during which Pakistan has grappled with economic volatility and external debt pressures. The consistent increase over recent weeks reflects the effectiveness of fiscal and monetary policies aimed at restoring macroeconomic stability.
Achieving this milestone is a significant step for the country’s financial health. It boosts investor confidence and could play a pivotal role in securing future international financing. At the same time, it underscores the importance of maintaining this momentum through prudent economic management and consistent inflows.
Way Forward
As Pakistan’s foreign exchange reserves approach the $11.5 billion mark, the central bank and government must continue focusing on policies that encourage sustainable inflows. Key areas include boosting exports, encouraging remittances, and securing multilateral support.
While the rise in reserves is encouraging, experts caution against overreliance on short-term measures. A sustainable economic recovery will depend on structural reforms that address the root causes of economic imbalances and create a favorable environment for long-term growth.
The latest figures mark a step forward for Pakistan’s economic outlook, signaling progress in managing external challenges and enhancing the country’s financial stability. As reserves climb, the government has an opportunity to solidify these gains and pave the way for a more resilient economy.