Stronger exports, remittances lift Pakistan’s reserves to highest since 2022  

ISLAMABAD: Pakistan’s foreign exchange reserves have jumped to their highest level in over three years, offering some much-needed breathing room for the country’s economy. 

The total liquid reserves now stand at $16.88 billion, a level last seen in April 2022. Of this, the State Bank of Pakistan (SBP) holds $11.68 billion, while commercial banks account for $5.20 billion, according to data released on Thursday. The central bank’s reserves alone rose by $167 million during the week ending June 6. 

“This is a 20-week high for the SBP’s reserves,” said Ali Najib, Deputy Head of Trading at Arif Habib Limited. “The rise reflects a mix of stronger exports, stable remittance flows, and inflows from the IMF and friendly countries.” 

The fresh boost has slightly improved Pakistan’s import cover to 1.94 months from 1.91 months a week earlier, still modest, but a step in the right direction for a country that has repeatedly faced balance of payments stress in recent years. 

So far this fiscal year, reserves have grown by $2.88 billion, providing some stability to the currency and easing investor concerns about default risks. 

“The improved reserves picture gives the country a bit more room to manage its external obligations, support the rupee, and control inflation,” said Najib. 

The focus now shifts to the SBP’s Monetary Policy Committee, which is set to meet on Monday, June 16. A recent poll by Topline Securities shows that most market participants, 56 per cent, expect the central bank to keep its policy rate unchanged. That’s up from just 31 per cent in the previous poll. On the other hand, 44 per cent believe the SBP may cut rates by at least 50 basis points, with a quarter of them expecting a larger cut of 100bps. 

Topline Research believes there’s space for a rate cut, pointing to lower inflation expectations for the new fiscal year. Average inflation for FY2026 is projected between 6 and 7 per cent. If the policy rate stays at 11 per cent, it would result in a real interest rate of 400 to 500 basis points, significantly higher than the historical average of 200 to 300bps. 

Still, many economists think the SBP may opt for caution and keep rates unchanged. The reason? Global uncertainty. 

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