Pakistan’s central bank made a significant move in 2024, purchasing over $9 billion from the local market to stabilize its foreign exchange reserves, a strategic effort aimed at keeping the country’s economy afloat amid dwindling foreign loans. The bulk of the purchases, more than $4.5 billion, occurred between July and December, according to State Bank of Pakistan (SBP) Governor Jameel Ahmad.
To further secure its financial footing, Pakistan has also requested the UAE to roll over a $2 billion loan maturing in mid-January, a gesture aligned with the International Monetary Fund’s (IMF) Extended Fund Facility. Despite the IMF’s $7 billion loan, Pakistan’s bank purchases far exceeded this figure, though the IMF loan carries an interest rate nearing 5%.
While these interventions have kept Pakistan’s reserves stable at around $11.7 billion, they’ve also contributed to a weak rupee, currently trading at Rs278 to a dollar. Critics argue that the central bank’s actions have devalued the rupee by around Rs40-45, spurring inflation. However, the alternative would have seen reserves drop below $3 billion, resulting in even greater economic turmoil.
The SBP’s efforts have also prevented the country’s external debt from skyrocketing past $133 billion, while market purchases helped maintain a more sustainable reserve level. Despite the challenges, Pakistan’s financial outlook remains uncertain, with ongoing scrutiny over offshore payments and remittance policies adding to the country’s complex economic landscape.
NEWS DESK
PRESS UPDATE