KARACHI: The foreign exchange reserves held by the State Bank of Pakistan (SBP) recorded a week-on-week increase of $77 million to $7.257 billion during the period ended on Nov 24, the central bank announced on Thursday.

In the preceding week, the SBP attributed an outflow of $216m to debt servicing but didn’t explain the reasons for this buildup in reserves.

Bankers say the SBP regularly buys dollars from the banking market and this $77m rise is the reflection of this practice.

The government has informed the nation that the country is expected to receive up to $50bn in investment over the next three to five years. However, these reports of billions of dollars could not change the market sentiment, which looks dormant.

The currency dealers in the interbank market noted no significant change in the exchange rate, which remained nearly stable for over a week with slight fluctuations — initially in favour of the dollar and later in favour of the PKR.

The SBP reported the closing price of the dollar at Rs285.17 in the interbank market on Thursday, compared to Rs285.39 a day earlier, indicating a 22 paise appreciation of the PKR.

Over the last four consecutive sessions, the rupee has appreciated against the dollar, totalling only 47 paise.

Currency experts suggest that while the exchange rate appears stable, weak inflows could disrupt this temporary stability.

They emphasise that any significant outflow for debt servicing could be detrimental to the exchange rate. The country requires an average of $2bn per month for debt servicing, and the outflow of profits from foreign investments is also a critical factor. During July-October FY24, the outflow of profits on foreign investments reached $485m.

According to the SBP, foreign exchange reserves held by the central bank were $7.257 billion for the week ending Nov 24.

Published in Dawn, December 1st, 2023