Pakistan’s foreign reserves plunge by $540mln to six-month low

Pakistan’s foreign exchange reserves, managed by the State Bank of Pakistan (SBP), witnessed a sharp decline over the past week, falling by $540 million.

According to data released on Thursday, the reserves stood at $10.61 billion as of March 21, 2025.

The country’s total liquid foreign exchange reserves, which include holdings by both the SBP and commercial banks, amounted to $15.55 billion.

Out of this, commercial banks held $4.94 billion, while the remaining portion was managed by the central bank.

This decline has brought the SBP’s reserves to their lowest level in six months. The central bank clarified that the primary reason for this drop was external debt repayments, which significantly affected the reserve position. In an official statement, the SBP acknowledged the reduction, stating:

“During the week ended on March 21, 2025, SBP reserves decreased by $540 million to $10,606.8 million due to external debt repayments.”

This decline follows a modest increase of $49 million in the SBP’s reserves during the preceding week. The fluctuations in foreign exchange reserves reflect the ongoing economic challenges, particularly in managing external obligations while maintaining financial stability.

A drop in foreign exchange reserves can have multiple implications for Pakistan’s economy. Lower reserves reduce the country’s ability to cover import bills, making it harder to stabilize the local currency.

Additionally, regular external debt repayments put further pressure on foreign exchange holdings, necessitating efforts to boost reserves through foreign inflows, investments, and financial assistance from global institutions.