KARACHI: The State Bank of Pakistan (SBP) announced on Thursday that its foreign exchange reserves had risen by $21 million, reaching a total of $11.22 billion. This modest increase comes as the central bank continues its efforts to boost its forex reserves, with a target of achieving $13 billion by the end of the fiscal year 2025.
The increase in the SBP’s reserves, while a positive development, highlights the ongoing challenge the country faces in stabilizing its foreign exchange position. Pakistan’s total foreign exchange reserves now stand at $15.92 billion, with $4.7 billion of this amount held by commercial banks. Despite the rise in reserves, the gap between the current reserves and the target set for the end of FY25 underscores the difficulty in building up sufficient reserves to support the country’s external financing needs.
The central bank’s foreign exchange reserves are a crucial indicator of Pakistan’s economic health, reflecting the country’s ability to meet its external debt obligations and manage the stability of the local currency. The rise in reserves this week, though modest, signals a continued effort by the SBP to improve Pakistan’s financial standing. However, reaching the $13 billion target by FY25 will require a sustained and robust inflow of foreign currency.
For the SBP, increasing reserves has become a central priority as it seeks to stabilize the economy amid challenges such as inflationary pressures, rising debt, and a weakening currency. The government’s ability to maintain foreign exchange reserves is critical not only for paying off external debts but also for securing investor confidence and stabilizing the country’s financial markets.
Pakistan has faced several challenges in recent years related to foreign exchange reserves, with external debt obligations, high import bills, and inflationary pressures straining the economy. The recent rise in reserves may provide some relief, but the central bank’s target for FY25 is ambitious given the current economic climate.
The central bank has been exploring various avenues to enhance its foreign exchange reserves, including securing loans from international institutions, attracting foreign direct investment (FDI), and promoting export growth. However, these efforts have not been enough to meet the growing demands of the country’s external obligations.
The SBP’s struggle to meet its reserve target comes as Pakistan works to implement structural reforms aimed at improving its economic resilience. In addition to efforts to increase forex reserves, the government has been working on fiscal consolidation, tax reforms, and boosting foreign investments, which are expected to provide long-term stability to the economy.
Despite these efforts, the country’s reserves remain below the levels needed to maintain a comfortable buffer against economic shocks. The $21 million increase in SBP reserves is a step in the right direction, but much more will be required to meet the ambitious target set for FY25.
As Pakistan navigates its economic challenges, the role of the central bank in managing foreign exchange reserves will remain crucial in ensuring the country can meet its financial obligations and stabilize its economy. The coming months will be critical in determining whether the SBP can achieve its $13 billion reserves target by the end of the fiscal year.