Pakistan’s foreign exchange reserves witnessed a modest increase of $30.8 million over the past week, according to a report released by the State Bank of Pakistan (SBP). This brings the country’s total liquid foreign exchange reserves to $14.415 billion as of June 14, 2024, compared to $14.384 billion the previous week.
The SBP’s reserves drove the rise almost entirely, surging by $31 million to $9.135 billion. This positive trend comes amidst a gradual increase in SBP reserves in recent weeks, possibly due to their intervention in the local currency market by buying US dollars. This strategy is working, as the supply of USD currently exceeds the demand for import payments and other purposes.
While the central bank hasn’t officially explained the increase, a few promising signs are emerging. Pakistan’s foreign exchange reserves have remained comfortably above $9 billion for several weeks, offering a buffer of nearly two months of import coverage. Coupled with the fact that the trade deficit has been shrinking as exports shoot up, these positive trends are likely to continue.
Industries and governments have also been contributing generously to the future of exports by making moves to support the most profitable markets. For one, plans to build the country’s largest IT park have been set in motion. Since IT exports have risen significantly this year, this will ensure a strong source of foreign exchange.
Additionally, the Pakistani rupee has exhibited stability against the US dollar. This positive trend is further bolstered by a significant rise in worker remittances, a crucial source of foreign exchange. Remittances reached a record high of $3.24 billion in May 2024, showing a promising trajectory. Export earnings have also improved, contributing to the overall foreign exchange situation.
While the increase this week is small, the gradual upward trend in Pakistan’s foreign exchange reserves is a positive development. This trend, combined with rising worker remittances and improved export earnings, evidences a more stable economic future for the country.
