Pakistan’s foreign exchange reserves lowest in region: Governor SBP

ISLAMABAD: Pakistan’s foreign exchange reserves are the lowest among regional countries when compared to their import bills, says State Bank of Pakistan Governor Jameel Ahmed, ARY News reported.

Governor Jameel Ahmed made these remarks before the Senate Standing Committee on Finance, stating that inflation is expected to rise further in the last quarter of the current fiscal year and the first quarter of the next one. He also highlighted that Pakistan must meet $4.5 billion in external debt payments by July 2025.

Ahmed confirmed that a UAE safe deposit will be cleared on schedule this month. He added that for the first time in 20 years, the current account showed a surplus as of November in the ongoing fiscal year.

A reduction in the interest rate has lowered debt servicing costs from PKR 9.8 trillion to PKR 8.3 trillion. During the briefing, it was revealed that Pakistan banks pay around $800 million annually for ATM card and online transaction services. The committee suggested introducing a local payment card to reduce this burden.

The chairman of the committee warned that unless banks halt dollar payments for local services, legislation will be considered. He expressed concern over dollar shortages while billions are spent on card services.

Despite launching the PayPak card in 2016, the scheme failed to gain traction. Ahmed stated that remittances could reach $35 billion this fiscal year, surpassing the budget target by $5 billion. He noted that the central bank currently holds $11.7 billion in reserves and intervenes in the market by buying surplus dollars or selling when necessary.

The State Bank expects a profit of PKR 3.4 trillion this fiscal year, while fiscal space in debt servicing could reach PKR 1.5 trillion, helping achieve budgetary targets.

On December 17, 2024, SBP governor announced that Pakistan paid back two billion dollars loan in past two years.

In a television talk show, SBP governor pointed out that the foreign exchange reserves have also increased.

He shared that the current account will be 700 million dollars surplus in the month of November.

Central bank’s governor said that the State Bank of Pakistan has purchased dollars from the interbank.

He also said that the remittances from overseas will cross US dollars 35 billion during the current financial year.

The governor’s statement came after the State Bank of Pakistan (SBP) slashed policy rate by 200 basis points in its monetary policy on Monday.

“The Monetary Policy Committee (MPC) has decided to cut the policy rate by 200 bps to 13 percent, effective from December 17, 2024,” the SBP said in its statement.

It added that the inflation declined to 4.9 percent on a year-to-year basis in November2024, in line with the MPC’s expectations.