In an effort to shore up foreign exchange reserves, the Government of Pakistan purchased $7.8 billion from the open market in the last 12 months, senior officials of the State Bank of Pakistan (SBP) informed the National Assembly’s Standing Committee on Finance on Tuesday.
In his briefing, SBP Deputy Governor Inayat Hussain said the government aimed to increase its foreign exchange reserves to $15.5 billion by December 2025 and $17.5 billion by June 2026. In July alone, he said, the central bank purchased $720 million from the market.
Despite these interventions, Pakistan’s foreign exchange reserves remain below the level required to cover three months of imports—a critical threshold for external stability. Hussain cautioned that low reserves would continue to exert pressure on the Pakistani rupee, leading to further depreciation if not managed carefully.
The central bank official stressed that the rupee was presently neither undervalued nor overvalued against the U.S. dollar and was currently trading at its fair value. However, he warned, any further appreciation of the rupee would make imports costlier, potentially reducing reserves and increasing the trade deficit.
SBP officials also revealed the ongoing International Monetary Fund (IMF) program permitted a maximum exchange rate deviation of 1.2% between the interbank and open market rates. The measure, they said, is part of broader reforms to keep currency volatility in check and improve transparency.
Growth forecast revised
The central bank revealed it has revised Pakistan’s GDP growth estimate for the current fiscal year to 3.2%, below the government’s official target of 4.2%. Officials cited weaker-than-expected performance in key sectors as the primary reason for the revision, with Hussain noting the country’s average GDP growth over the past decade has hovered around 3%.
The central bank also noted persistent concerns from inflation, warning of higher-than-targeted inflation between April and June of the current fiscal year due to external pressures and potential energy price adjustments.
Current account and remittances
SBP officials forecast the current account deficit to widen to 1% of GDP in FY2025. On a more positive note, they projected remittance inflows to reach $40 billion, though noted recent changes to incentive schemes may affect this forecast.
According to the central bank, the discontinuation of a scheme providing banks with 20 Saudi Riyals for every $200 remitted had led to a temporary decline in remittance volumes, underscoring the importance of targeted support mechanisms for overseas Pakistanis.