Islamabad, Feb 6: The State Bank of Pakistan (SBP) made a significant move in the interbank market between June and October 2024, purchasing $3.8 billion to bolster its foreign exchange reserves by $2.1 billion and meet upcoming debt obligations. Out of the total amount, $1.7 billion was allocated specifically for servicing debt.
This central bank intervention was further supported by an unexpected surge in remittances, which saw a 33% increase, reaching $17.8 billion in the first half of the fiscal year. Despite the significant purchase of dollars, the exchange rate remained steady, a sign of the SBP’s successful management of the situation. According to forecasts, the central bank could purchase an additional $5 billion if remittance inflows continue on their upward trajectory. Finance Minister Muhammad Aurangzeb has projected that remittances will surpass $35 billion by the end of the fiscal year 2025.
In terms of trade, the deficit grew in December 2024 as imports surged. However, bankers remain optimistic, predicting that the trade imbalance will stay within manageable limits. Currently, the country’s current account stands positive at $1.2 billion. SBP’s governor has stated that the fiscal year’s surplus or deficit will likely remain within a narrow margin of 0.5% of GDP, showcasing the ongoing resilience of the economy despite the widening trade deficit.
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This strategic approach by the SBP, combined with a robust remittance flow, has provided stability in foreign reserves and ensured that the country can meet its financial obligations. It also highlights the importance of maintaining a balanced trade account and a steady exchange rate to support long-term economic growth. With projections indicating an increase in remittances, the fiscal outlook for the country appears positive, suggesting that the central bank’s efforts will continue to strengthen Pakistan’s financial position.
