KARACHI
\nPakistan\u2019s central bank bought a record $722 million in foreign currency from the interbank market in July to help boost its foreign exchange reserves, data showed.
\nThe State Bank of Pakistan (SBP) purchased $573 million from the currency market in June.
\nSBP Governor Jameel Ahmad told analysts after the monetary policy meeting in September that the central bank would begin publishing data on its foreign exchange interventions in the interbank market on a monthly basis, with a three-month lag.
\nMohammed Sohail, the CEO at Topline Securities said the SBP\u2019s purchases of dollars from the market support its forex reserves.
\n\u201cWith higher USD inflows this is a better approach to increase the liquid FX reserves of the country and to stabilise the PKR value,\u201d Sohail added.
\nThe Pakistani rupee has appreciated about 10 per cent since it peaked at 307 in early September 2023 and has been stable below 280 for 10 months.
\nAwais Ashraf, director research at AKD Securities Limited, said these purchases were used to make interest payments on external debt and meet other external liabilities apart from increasing reserves.
\nAs of October 25, the SBP\u2019s reserves amounted to $11.15 billion, which is sufficient to fund imports for more than two months. It is anticipated that the reserves will almost triple from their June 2023 levels reaching approximately $13 billion by June 2025.
\nAccording to International Monetary Fund (IMF) data, Pakistan\u2019s gross financing requirement for the fiscal year 2025 is $18.8 billion, a nine-year low. Over the past nine years, the average gross financing need has stayed at $25 billion.
\nThe lower current account deficit and comparatively reduced repayments in FY25 are the main reasons for the notable decline in the gross financing requirements for FY25.
\nAccording to the SBP, the current account deficit has dropped significantly and is still within manageable levels, despite a notable increase in imports, especially non-oil imports, and the normalisation of profit\/dividend repatriation by foreign investors. Strong rise in both exports and worker remittances is the main reason for the current account balance\u2019s improvement. The SBP\u2019s foreign exchange reserves have been strengthened as a result of the low current account and better financial inflows.
\nThe IMF in its latest country report released last month said that the functioning of the FX market has improved considerably, and the interbank-open market spread continues to be negligible. Stronger policies and confidence, and relatively calm FX market conditions have enabled the SBP to conduct sizable FX purchases, which have helped double reserves.
\nThe IMF\u2019s 37-month $7 billion loan programme aims to return gross reserves to at least three months of imports, supported by disbursement of multilateral and bilateral loans and FX purchases, it said.
\n\u201cPrice discovery in the interbank market is critical to the exchange rate serving as a shock observer. The SBP\u2019s commitment to stronger transparency about its FX operations and reserves target are welcome,\u201d the IMF report said.
\n\u201cWhile Pakistan\u2019s external position in FY23 was broadly in line with the level implied by medium-term fundamentals and desirable policies, the exchange rate should continue to be allowed to adjust to buffer shocks, maintain competitiveness, and help rebuild reserves,\u201d it added.
\n\u201cRefraining from any restrictions on current account payments, including dividend and profit repatriation, is key to attracting high-quality investment,\u201d it noted.<\/p>\n","protected":false},"excerpt":{"rendered":"
KARACHI Pakistan\u2019s central bank bought a record $722 million in foreign currency from the interbank market in July to help boost its foreign exchange reserves, data showed. The State Bank of Pakistan (SBP) purchased $573 million from the currency market in June. SBP Governor Jameel Ahmad told analysts after the monetary policy meeting in September […]<\/p>\n","protected":false},"author":2,"featured_media":441307,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[5],"tags":[],"class_list":{"0":"post-441269","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-business"},"yoast_head":"\n