Pakistan's foreign exchange reserves drop by $1.3B due to external debt payments

The State Bank of Pakistan announced on Monday that Pakistan's foreign exchange reserves fell by $1.305 billion for the week ended June 19. The central bank attributed this sharp decline entirely to mandatory external debt repayments.

However, officials expect subsequent multi-billion dollar inflows to significantly bolster the country's financial reserves by the end of June.

Why did Pakistan's foreign exchange reserves decline in June?

Pakistan's foreign exchange reserves declined because the central bank processed substantial external debt repayments during the week.

This mandatory outflow dropped the central bank's holdings to $15.916 billion. However, upcoming multilateral inflows and commercial loan refinancings totaling $2.4 billion will fully restore and strengthen the national reserve position by the end of the month.

The official data released on Monday showed that total liquid foreign reserves held by the country stood at $21.485 billion. Out of this total country aggregate, commercial banks across the nation held $5.568 billion in net foreign assets.

Foreign investors and market analysts track these weekly balances closely to gauge macro stability and local currency health.

The central bank clarified that it has already secured substantial financial inflows after the June 19 reporting cutoff date. These incoming funds include a $700 million transfer from an international multilateral institution to support the national economy.

Additionally, the government successfully secured approximately $1.7 billion through the technical refinancing of an official commercial loan.

[H2: When will the new inflows reflect in the official reserve position?

The central bank confirmed that both incoming financial streams will be reflected in the official reserve statement for the week ending June 30.

This timely injection will provide a critical liquidity boost to the external financing position right at the close of the current fiscal year. The anticipated recovery aims to reinforce investor confidence and preserve overall exchange rate stability in the upcoming months.