KARACHI, PAKISTAN — The State Bank of Pakistan (SBP) has purchased $5.9 billion from the currency market since June 2024 to strengthen its foreign exchange reserves, despite ongoing support from the International Monetary Fund (IMF) and allied countries.

The increase in remittance inflows from overseas Pakistanis provided the SBP with the capacity to buy dollars; however, the central bank has yet to meet its initial purchase targets.

Due to unexpectedly higher remittances, the SBP has revised its foreign exchange reserves target upward to $14 billion and increased the remittance forecast to $38 billion for the fiscal year 2025.

According to Topline Securities, the SBP bought $223 million worth of dollars in February alone, bringing the total purchases since June 2024 to $5.9 billion by the end of February.

Following a $1 billion tranche from the IMF on May 16, SBP’s foreign exchange reserves climbed to $11.5 billion, with approximately half of the increase attributed to market dollar purchases. This year’s dollar buying is on track to set a record high.

Pakistan also expects to receive $1.4 billion in climate funding under the IMF’s Resilience and Sustainability Facility (RSF), as part of the $7 billion Extended Fund Facility.

Financial sector analysts indicate that Pakistan has likely secured a $1 billion agreement with the United Arab Emirates, with funds anticipated this month or early next month.

Experts suggest that Pakistan’s firm response to recent Indian aggression has restored its regional standing, potentially encouraging foreign investors to view the country as a stable destination for long-term investment. However, foreign direct investment (FDI) for the first 10 months of FY25 remains slightly below last year’s figures.

Despite sluggish economic growth and rising unemployment over the past three years, Pakistan maintains a comfortable position with a current account surplus of $1.88 billion during the first 10 months of FY25.

Currency dealers report that although dollar liquidity remains adequate, the SBP continues to impose import restrictions. April saw a record-high trade deficit, coupled with unprecedented repatriation of profits on foreign investments. Market insiders note that the SBP manages exchange rates by simultaneously buying dollars and regulating imports.

An analyst commented, “The SBP acquires dollars from the currency market with relative ease, but the amount is insufficient, as Pakistan requires $26.2 billion for debt servicing in FY25, with a similar sum needed for FY26.”