ISLAMABAD: The State Bank of Pakistan has reported a notable increase inthe country’s liquid foreign exchange reserves, with holdings rising by$141 million during the week ending January 2, 2026. This incremental gainhas propelled the central bank’s reserves to $16.056 billion, marking thehighest level achieved since fiscal year 2021. The total liquid foreignexchange reserves of the country now stand at $21.192 billion,incorporating net holdings of commercial banks at $5.137 billion. Thisdevelopment signals a continued strengthening of external buffers at a timewhen Pakistan navigates global economic uncertainties and domestic recoverymeasures. Analysts view the rise as a positive indicator of improvedliquidity management.
The latest weekly data released by the State Bank of Pakistan highlightsthe resilience in foreign currency accumulation despite periodic debtrepayments and external obligations. The $141 million increase primarilystemmed from routine inflows, including export proceeds and other regularreceipts, outweighing outflows during the period. This modest yetconsistent uptick follows a pattern observed in recent months, wherereserves have steadily climbed from levels around $14.5 billion inmid-2025. Such progress underscores the effectiveness of macroeconomicpolicies aimed at stabilizing the external account.
Historically, Pakistan’s foreign exchange reserves experienced significantvolatility in recent years. In fiscal year 2021, reserves peaked atapproximately $17.29 billion, providing substantial import cover during arelatively stable period. However, subsequent economic pressures, includinghigh import bills, reduced remittances in certain phases, and globalcommodity price shocks, drove reserves to a critical low of $4.44 billionin fiscal year 2023. At that juncture, the country faced acute defaultrisks, prompting urgent international financial support and stringentadjustment programs.
The turnaround became evident from mid-2025 onward, as targeted reformsunder international arrangements bolstered inflows. Reserves crossed the$15 billion threshold in December 2025, briefly reaching $15.88 billionbefore surpassing the $16 billion psychological barrier. This recoveryreflects improved current account dynamics, with surpluses recorded inseveral months, alongside prudent foreign exchange market interventions bythe central bank. Commercial banks have also contributed positively, adding$40 million in the latest week to reach $5.137 billion in net reserves.
Experts attribute the sustained build-up to several key factors, includingenhanced export performance in sectors such as textiles and agriculture,stable remittance inflows from overseas Pakistanis, and controlled importgrowth through policy measures. The current account has shown notableimprovement in the ongoing fiscal year, supported by multilateraldisbursements and bilateral commitments. These elements have collectivelyenabled the State Bank to undertake net purchases in the interbank market,further augmenting reserves without excessive borrowing.
The present level of reserves provides import cover of approximately 2.65to 3 months, a marked improvement from the precarious coverage during the2023 crisis. While still below ideal benchmarks of six months recommendedby international standards, this buffer offers greater room for maneuver inmanaging external payments. It also instills confidence among investors andrating agencies, potentially facilitating easier access to internationalcapital markets in the future.
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Looking ahead, the trajectory of reserves will depend on continued policyconsistency, global oil price trends, and the pace of structural reforms.Any escalation in geopolitical tensions or commodity shocks could posechallenges, yet the recent momentum suggests Pakistan is better positionedto absorb such pressures. The central bank remains committed to maintainingexchange rate stability while gradually building reserves to supportlong-term economic growth.
This latest increase, though incremental, reinforces optimism regardingPakistan’s economic stabilization journey. As the country progressesthrough the current fiscal year, sustained accumulation could pave the wayfor broader recovery, reduced vulnerabilities, and enhanced investorsentiment in the months to come.
Source: https://www.dawn.com/news/1965896
Tags: Pakistan, State Bank of Pakistan, Foreign Exchange Reserves, SBP
