SBP's foreign reserves drop amid external debt repayments

The State Bank of Pakistan (SBP) reported a decline in its liquid foreign reserves, which fell by $76 million during the week ended on January 24 due to external debt repayments.

The total reserves held by the country reached $16.05 billion, while net foreign reserves held by commercial banks stood at $4.68 billion.

Despite the import bill surpassing export earnings in the last quarter, the inflow of remittances more than compensated for the widening trade deficit.

Based on these trends, particularly the robust workers' remittances, the outlook for the current account balance has improved considerably. It is now expected to remain between a surplus and a deficit of 0.5% of GDP in fiscal year 2024-25 (FY25).

Meanwhile, net financial inflows, though tepid during the first half of the current fiscal year, are expected to improve going forward as a sizable part of official debt repayments has already been made.

Consequently, the improved current account outlook, along with the expected realization of planned financial inflows, is likely to increase the SBP’s reserves beyond $13 billion by June.