The State Bank of Pakistan (SBP) has maintained the rate of remuneration on the Special Cash Reserve Account (US$) at 2.67 percent for March 2026, keeping it unchanged from February while slightly lower than the 2.69 percent recorded in January 2026. The latest update was communicated through a circular issued by the central bank, reinforcing the existing structure governing foreign currency deposits under FE Circular 25 of 1998.
The applicable rate covers deposits mobilized under the FE-25 framework, which regulates foreign currency accounts within Pakistan’s banking system. Under this mechanism, commercial banks and non-bank financial institutions (NBFIs) are obligated to maintain a defined portion of their foreign exchange liabilities with the SBP in the form of cash reserves. Specifically, institutions are required to hold reserves equivalent to 25 percent of their total FE-25 deposits. This reserve requirement is divided into two components: 5 percent in a non-remunerative Cash Reserve Account and 20 percent in a remunerative Special Cash Reserve Account.
While the 5 percent Cash Reserve Account does not earn any return, the 20 percent placed in the Special Cash Reserve Account is compensated monthly. The remuneration rate is notified by the SBP and serves as an important benchmark for liquidity management in the foreign currency segment of Pakistan’s financial system. By maintaining the rate at 2.67 percent for March, the central bank has signaled continuity in its approach toward foreign currency reserve compensation amid evolving global rate dynamics.
The methodology for determining the remuneration rate is anchored in international money market benchmarks. As outlined in DMMD Circular Letter No. 03 of 2023, the rate applied to the Special Cash Reserve Account is calculated using the CME 1-month Term Secured Overnight Financing Rate (SOFR) published on the last working day of the preceding month, with a deduction of 1 percent as service charges. This formula ensures that the remuneration structure remains aligned with prevailing global dollar funding conditions while accounting for administrative costs.
By linking the remuneration to CME Term SOFR, the SBP has embedded a transparent and market-based mechanism into its foreign currency reserve framework. SOFR, which replaced LIBOR as a key reference rate in global financial markets, reflects the cost of overnight borrowing collateralized by U.S. Treasury securities. Its 1-month term variant provides a forward-looking gauge of short-term dollar liquidity conditions, making it a relevant anchor for foreign currency reserve compensation.
The marginal decline from January’s 2.69 percent to 2.67 percent in February and March mirrors subtle shifts in international rate benchmarks rather than a standalone domestic policy move. The SBP’s adherence to the established calculation formula underscores its commitment to maintaining consistency and predictability in reserve remuneration practices.
This adjustment forms part of the broader framework through which the SBP manages foreign exchange liquidity within the banking system. By aligning reserve remuneration with international benchmarks, the central bank aims to maintain competitive neutrality for banks holding foreign currency deposits while safeguarding systemic stability. The March 2026 rate decision thus reflects both continuity in policy execution and responsiveness to global market indicators shaping dollar liquidity trends.
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