Central Bank Reserves in Pakistan Surge to $14.51 Billion, Going Beyond IMF's Set Objective
Pakistan's foreign exchange reserves have reached an impressive milestone, surpassing $16.6 billion by mid-2025. This significant increase is a marked improvement from previous periods when reserves were reported to be between $10-14 billion.
The boost in reserves can be attributed to several factors. A current account surplus of $1.9 billion in the first nine months of fiscal 2025, a stark contrast to a deficit of $200 million in the same period the previous year, has contributed to the accumulation of foreign exchange reserves.
The country's ongoing reforms under a $7 billion IMF program have also played a crucial role. The program, aimed at stabilising the economy and providing external financial support, has likely improved investor confidence and helped shore up reserves.
Monetary policy easing, with the State Bank of Pakistan reducing its policy interest rates by over 1,000 basis points in fiscal 2025, has also contributed to the growth in reserves. This move aimed to encourage economic growth and may have improved the trade and investment environment.
Higher revenue collection by the government, amounting to Rs13.37 trillion in the first three quarters of fiscal 2025, has reduced fiscal deficits and external borrowing needs, positively influencing reserves.
Discussions of debt rescheduling and external financing arrangements have also supported reserves, helping sustain import bills for the coming months.
Notably, Pakistan's national savings have outpaced total investment in fiscal 2024-25, contributing to improved economic fundamentals and reserve accumulation.
However, despite the rise in reserves, Pakistan's economy shows fragile conditions. GDP growth in fiscal 2025 was 2.68%, below the target of 3.6%. Inflation was moderate at 4.6%, and the fiscal deficit stood at 2.6% of GDP. The economy's recovery remains uneven across sectors, with agriculture facing significant challenges.
The external debt servicing burden remains high, but the improvement in external buffers, such as the increase in reserves, is likely to boost investor sentiment. Khurram Schehzad, the government finance adviser, stated that reserves are rising, debt is falling, and stability is strengthening. The reserves now exceed the International Monetary Fund's June 2025 reserves target under Pakistan's ongoing $7 billion Extended Fund Facility (EFF).
The IMF has encouraged Pakistan to maintain exchange rate flexibility and strengthen domestic revenue collection to further enhance its economic stability. The continued focus on these areas will be crucial in maintaining reserve adequacy and ensuring Pakistan's economic growth continues on a positive trajectory.
[1] "Pakistan's Foreign Exchange Reserves Surge to Highest Level Since 2018," Reuters, 15 July 2025. [2] "Pakistan's Foreign Exchange Reserves Set to Rise with Debt Rescheduling," Dawn, 20 June 2025. [3] "Pakistan's National Savings Outpace Investment," Business Recorder, 10 August 2025. [4] "Pakistan's Economic Growth Remains Below Target Despite Rising Reserves," The Express Tribune, 25 July 2025.
- The surge in Pakistan's foreign exchange reserves, now exceeding $16.6 billion, is not only due to the current account surplus of $1.9 billion but also driven by factors such as the positive impact of monetary policy easing, higher government revenue collection, and the ongoing IMF reforms, which have likely improved investor confidence.
- As Pakistan's national savings outpace total investment, discussions of debt rescheduling and external financing arrangements, coupled with the improvement in external buffers like the increase in reserves, have supported the country's economy and are likely to boost investor sentiment, contributing to a positive trajectory in Pakistan's economic growth.
