Pakistan’s foreign reserves drop 23%, with fresh loans expected to provide relief

Pakistan’s central bank reported a 23% decline in foreign exchange reserves for the week ending June 20, largely due to external debt repayments. However, the government remains optimistic, expecting an improvement of over $3.5 billion in the coming week from new inflows by international financial institutions.

According to data released by the State Bank of Pakistan (SBP) on Thursday, the country’s total liquid foreign exchange reserves stood at $14.397 billion as of June 20, down from $17.004 billion a week earlier.

The SBP’s own reserves dropped from $11.721 billion to $9.064 billion, reflecting a decrease of $2.657 billion, mainly due to the repayment of commercial loans. In contrast, net reserves held by commercial banks increased slightly by $51 million to $5.332 billion.

The SBP noted that during the current week, it has received commercial loans amounting to $3.1 billion and multilateral inflows of over $500 million. These amounts are expected to be reflected in the reserves data for the week ending June 27.

In its latest monetary policy announcement on June 16, the SBP projected that the current account will shift to a moderate deficit in FY26 due to rising import demand amid weak export prospects, given ongoing global economic uncertainty. The central bank also cited risks to the external sector from geopolitical tensions—particularly in the Middle East—and volatile international oil prices.

From July to April of FY25, Pakistan recorded a cumulative current account surplus of $1.9 billion, driven largely by strong remittance inflows. These remittances helped offset increased imports and sluggish exports. Despite weaker-than-expected financial inflows, the SBP still projects foreign reserves will rebound to around $14 billion by the end of June 2025.