KARACHI: Pakistan’s foreign exchange reserves, managed by the State Bank of Pakistan (SBP), climbed by $18 million to reach $11.17 billion during the week ending November 1, 2024. This marks the 15th consecutive week of reserve growth, according to the central bank’s latest weekly update.
Despite the steady increase in reserves, the Pakistani rupee continued to decline, hitting a seven-week low at Rs277.95 against the US dollar in the interbank market. The rupee depreciated by Rs0.06, marking the fourth consecutive day of losses. Analysts attribute this decline to ongoing dollar purchases by the central bank and the slowdown in dollar sales by exporters.
Reserve Growth Boosted by IMF Loan
Over the past four months, Pakistan’s foreign reserves have seen a cumulative rise of over $2 billion. This growth includes a $1.03 billion installment from the International Monetary Fund (IMF) received in September. The increase in reserves has improved Pakistan’s import capacity, strengthening the country’s position to meet its foreign debt obligations.
While the central bank has not specified the exact cause of the recent rise in reserves, it has previously indicated that it has been actively purchasing dollars in local markets to support its foreign debt payments and to boost reserve levels.
Government Sets Higher Reserve Target
Finance Minister Muhammad Aurangzeb recently announced that Pakistan’s reserves are expected to reach $13 billion by June 2025, which would provide three months’ worth of import cover. The steady improvement in reserves has bolstered confidence among policymakers, who anticipate that global credit rating agencies, including S&P, Moody’s, and Fitch, may upgrade Pakistan’s credit rating from its current ‘C’ to ‘B’ within this fiscal year.
Such an upgrade could facilitate Pakistan’s access to new international financing through the issuance of Eurobonds in the next fiscal year, a move expected to strengthen the economy further.
Commercial Bank Reserves Decline
However, while the SBP’s reserves have shown growth, the foreign exchange reserves held by Pakistan’s commercial banks fell by $135.4 million, standing at $4.76 billion by the end of the week. This decrease contributed to an overall drop in the country’s total reserves, which declined by $117.2 million, settling at $15.93 billion.
Strengthening Dollar Impacts Rupee
The rupee’s depreciation has been partly influenced by the strengthening of the US dollar against major global currencies, such as the euro and the pound. The trend has also been supported by the central bank’s dollar purchases and limited dollar sales by local exporters, creating pressure on the local currency.
Gold Prices Plunge
In a related trend, gold prices in Pakistan dropped sharply, declining by Rs5,400 to Rs276,800 per tola (11.66 grams) in the local market. This marks a significant loss in value, aligning with global declines. Over the past three days, gold has seen a total drop of Rs6,900. In the international market, the price of gold per ounce (31.10 grams) fell by $65 to $2,662, following the announcement of Donald Trump’s victory in the U.S. presidential elections.
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