The State Bank of Pakistan (SBP) has significantly ramped up its presence in the interbank foreign exchange market, purchasing a total of $1.024 billion during December 2025. Data released by the central bank’s Domestic Markets and Monetary Management Department highlights a substantial increase in market absorption compared to the previous month, where the SBP acquired $620 million in November 2025. This sharp rebound suggests a renewed surge in foreign exchange inflows or a strategic move by the regulator to stabilize the exchange rate by mopping up excess liquidity from the system.
On a year-on-year basis, the December intervention paints an even more active picture of the central bank’s market operations. The $1.024 billion purchased is nearly double the $536 million recorded in December 2024, indicating that inflow conditions in the current fiscal year have strengthened considerably compared to the same period last year. These interventions are officially defined as net foreign exchange interventions, encompassing both outright and swap purchases of foreign currency minus any sales conducted with commercial banks in the interbank market.
During the first half of the 2026 fiscal year, spanning July to December 2025, the State Bank has been a consistent buyer, accumulating a net total of $4.146 billion from the market. The data shows that the central bank’s purchasing activity was not uniform across the six-month period but was instead heavily concentrated in specific windows. September, October, and December each saw interventions exceeding the $1 billion mark, while the initial months of July and August remained relatively quiet in terms of large-scale market absorption.
Despite the strong performance in December, a broader look at the half-year data shows a slight cooling in cumulative inflows when compared to the previous fiscal year. During the same July–December period in fiscal year 2025, the SBP had purchased a net $4.95 billion. The current cumulative figure of $4.146 billion represents a year-on-year decline of approximately $804 million. This suggests that while individual months like December have shown exceptional strength, the overall volume of foreign exchange entering the interbank market over the last six months is somewhat softer than the record levels seen a year ago.
Analysts suggest that these interventions are crucial for the State Bank to build up national foreign exchange reserves while preventing extreme volatility in the value of the Rupee. By absorbing surplus dollars during high-inflow periods, the central bank ensures it has sufficient liquidity to meet future external debt obligations and essential import payments. The December surge, in particular, points to a robust end to the calendar year, providing a buffer for the economy as it enters the second half of the fiscal year.
As the 2026 fiscal year progresses, the State Bank’s market management strategies will remain a focal point for investors and policy observers. The ability to maintain a balance between market-determined exchange rates and the need for reserve accumulation remains a primary challenge. With over $4 billion already absorbed in the first six months, the central bank appears well-positioned to manage the external sector’s requirements, though the slight year-on-year dip in total purchases highlights the need for continued vigilance in attracting sustained foreign currency inflows.
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