KARACHI: The State Bank of Pakistan’s (SBP) foreign exchange reserves continued to grow gradually in recent weeks, maintaining stability in the currency market and preventing the US dollar from appreciating against the rupee.

The dollar fell by 4 paise on Thursday to Rs280.92, according to SBP data. The central bank’s reserves rose by $16 million during the week ending Oct 24, reaching $14.471 billion. This level is close to the $14.5bn mark recorded at the end of the previous fiscal year.

Market participants said the SBP has adopted a cautious approach to dollar purchases in the interbank market this fiscal year, unlike FY25, when it reportedly bought $7.8bn. SBP Governor Jameel Ahmad recently stated that the central bank had purchased $20bn over the past three years.

Currency dealers said the gradual rise in reserves has reinforced confidence in the rupee, helping maintain exchange rate stability. “Consistency in the exchange rate reflects economic strength and gives both exporters and importers a stable base for planning,” said Atif Ahmed, a senior dealer in the interbank market.

SBP holdings near last year’s peak amid higher remittances

He added that rupee stability also signals policy consistency to international investors.

Despite improved sentiment, foreign investment inflows remain limited. Officials have expressed optimism about forthcoming investment commitments from Saudi Arabia and the United States, though these remain at the memorandum-of-understanding stage.

Bankers and market experts attributed much of the improvement in reserves to higher remittance inflows. In FY25, overseas Pakistanis remitted $38.3bn, providing liquidity that enabled the SBP to build reserves. The government expects remittances to exceed $40bn in FY26.

Over the last three years, about two million Pakistanis have moved abroad for employment.

Economists noted that this outward migration has supported foreign-exchange inflows through remittances, though they warned that it could contribute to long-term brain drain.

As of Oct 24, Pakistan’s total liquid foreign exchange reserves stood at $19.687bn, with commercial banks holding $5.216bn.

Analysts said the current pace of reserve accumulation may help sustain rupee stability, provided external conditions remain favourable and remittance flows continue. However, they noted that import pressures and potential delays in external financing could affect this trend in the months ahead.

Published in Dawn, October 31st, 2025