SBP dollar buying slows sharply as external payments ease, reserves strengthen

The State Bank of Pakistan’s (SBP) purchases of U.S. dollars from the market slowed sharply in July compared with the same month last year, as the government’s external debt payments were smaller in size. The July figure marked the second-lowest monthly dollar purchases in the past 14 months, according to official data.

Data from the central bank showed that dollar purchases stood at around $189 million in July, the lowest since January, when the SBP bought $154 million. In comparison, the bank had purchased $722 million worth of dollars in July 2024, the data said.

The SBP began publicly reporting its dollar purchases in June 2024, and since then, cumulative purchases have totaled $8.446 billion. During the full fiscal year 2024-25, the bank’s total dollar buying amounted to $7.684 billion.

SBP Governor Jameel Ahmed recently told analysts that the central bank had bought around $20 billion over the past three years. The purchases, he said, helped clear the backlog of profit and dividend repatriation for multinational companies operating in Pakistan.

An analyst estimated that Pakistan’s total external debt obligations for FY26 amount to about $26 billion, of which approximately $16 billion is expected to be rolled over. The remaining $10 billion will need to be paid during the year.

By the end of the first quarter of FY26, around $3 billion had already been repaid, meaning the central bank will need to arrange about $7 billion—assuming imports, exports, and remittances remain in line with government projections.

The SBP expects the current account deficit to remain within a range of 0%-1% of GDP during FY26, compared with a $2.1 billion surplus recorded in the previous fiscal year.

The government is relying heavily on remittances, which it hopes will reach $40 billion this year. Achieving that target, officials say, would provide an additional cushion and help meet the current account target.

In addition to meeting external debt obligations, the SBP’s dollar purchases have helped boost foreign exchange reserves. As of May 2024, reserves stood at $9.109 billion, enough to cover less than two months of imports.

A combination of continued dollar buying, timely IMF disbursements, inflows from other international lenders, debt rollovers, and growth in remittances has strengthened Pakistan’s external position. By the end of July, the SBP’s reserves had climbed to $14.3 billion, an increase of nearly $5.2 billion.

The central bank aims to raise reserves to provide three months of import cover, up from the current 2.5 months. It expects reserves to reach $15.5 billion by December and $17.8 billion by June next year.