Pakistan’s foreign reserves continue to rise

Pakistan's total liquid foreign reserves reached $16.6 billion as of December 13, sufficient to cover 2.5 months of imports.

Foreign reserves held by the State Bank of Pakistan (SBP) increased by $31 million to $12.1 billion, while net foreign reserves with commercial banks reached $4.5 billion, the central bank announced.

The country's reserves have been gradually increasing. SBP’s reserves have surged 28.7% from $9.4 billion on June 28 to $12.1 billion.

Finance Minister Muhammad Aurangzeb recently said that by end of the fiscal year, the reserves will reach around three months of import cover, which is one of the conditions of the International Monetary Fund for the release of the second tranche of the 37-month Extended Fund Facility.

The current account is in surplus for the first time in a decade, and inflation is at a 6.5-year low of 4.9%. Additionally, Roshan Digital Account inflows have reached $9 billion.

Pakistan's Credit Default Swap (CDS) spread — a measure of insurance against credit default risk — has dropped to a low of 5.05%, providing an opportunity to attract inflows.

The country's risk premium has improved by over 11.89% from a high of 12.38% in November 2022, now lower than that of some emerging and frontier markets.