SBP-held reserves rise by $27.1 million despite overall decline

KARACHI: The State Bank of Pakistan’s (SBP) foreign exchange reserves saw a modest uptick of $27.1 million, or 0.24 per cent, reaching $11.25 billion in the week ending on 28th February 2025, according to data released by the central bank on Thursday.

In contrast, the nation’s overall reserves declined by $51.9 million, a drop of 0.33 per cent, bringing the total to $15.87 billion. Reserves held by commercial banks saw a sharper decrease, falling by $79 million, or 1.68 per cent, to stand at $4.62 billion.

Throughout the current fiscal year, SBP-held reserves have experienced a notable increase of $1.86 billion, reflecting a 19.81 per cent rise. However, the reserves have seen a reduction of $461 million, or 3.94 per cent, in the calendar year so far.

Policy rate debate

The State Bank faces a complex situation regarding interest rates. On one side, the business community is advocating for a sharp cut of 500 basis points, while multinational corporations are urging caution.

Ehsan Malik, CEO of the Pakistan Business Council (PBC), believes the SBP’s Monetary Policy Committee (MPC) will likely take a measured stance and keep the policy rate steady for the time being.

“While inflation has been on a downward trend, the forward inflation outlook remains a critical factor. The current policy rate offers a positive spread of 4 per cent, which the MPC is keen to maintain,” Malik explained.

He also noted that the accumulation of foreign exchange reserves has slowed, with external financing pending improved credit ratings and the outcome of an ongoing review by the International Monetary Fund (IMF).

Read next: FBR’s tax collection crisis deepens with over Rs600 billion shortfall