SBP forex reserves drop by $76m to $11.37bn on external debt servicing

Four thousand US dollars are counted out by a banker counting currency at a bank in Westminster, Colorado. — Reuters/Files

KARACHI: Pakistan’s foreign exchange reserves held by the central bank fell by $76 million to $11.372 billion in the week ending January 24 due to external debt repayments, the State Bank of Pakistan (SBP) said on Thursday.

The country’s forex reserves decreased by $137 million to $16.052 billion and the reserves of commercial banks fell by $61 million to $4.68 billion.

The SBP’s FX reserves declined amidst low financial inflows and high debt repayments.

Governor State Bank of Pakistan Jameel Ahmad told reporters after the monetary policy meeting on Monday that most of the debt has already been repaid, including nearly $2.4 billion in foreign debt repaid in December and January, during a period of high year-end maturities.

According to Ahmad, out of the $26.1 billion in external debt repayments for FY25, the net amount adjusted for rollover/refinance is $10 billion, with $6.4 billion already paid. For the remainder of FY25, the net repayable amount is $3.6 billion. He mentioned that the expected inflows in the second half of this fiscal year from commercial banks and bilateral sources are likely to offset the outflows. As a result, there should be no pressure on forex reserves buildup.

With $100 billion in short- to medium-term financing requirements, Pakistan cannot afford the risk of leaving the International Monetary Fund (IMF) programme, according to recent remarks made by Minister of State for Finance Ali Pervaiz Malik.

According to the SBP’s monetary policy statement, while net financial inflows were modest during the first half of FY25, they are expected to improve moving forward, as a significant portion of official debt repayments has already been made. As a result, the improved current account outlook, coupled with anticipated financial inflows, is likely to elevate the SBP’s foreign exchange reserves above $13 billion by June 2025. The central bank noted that the outlook for the current account balance has significantly improved due to a surge in remittances, and it is now expected to remain between a surplus and a deficit of 0.5 per cent of the GDP in FY25.