KARACHI: The State Bank’s foreign exchange reserves have risen to $16 billion — the highest level since FY21.

Analysts say the development sends out a strong message about the stability of the exchange rate regime.

According to the central bank, reserves stood at their highest level — $17.29bn — in FY21. Since then reserves have kept falling, recording a low of $4.44bn in FY23. The country was not far from default at the time.

The State Bank reported that reserves increased by $141 million to $16.055bn during the week ending Jan 2, 2026. The total liquidity held by the country stood at $21.19bn, while the net holdings of commercial banks were recorded at $5.136bn.

Since most developing countries borrow heavily from international financial institutions, they must keep strong dollar reserves so that they can repay the loans in time.

Pakistan is no exception. It had to pay $26bn for debt servicing in FY25 and needs to cough up almost the same amount in FY26.

The central bank kept buying dollars from the inter-bank currency market on a massive scale during the last financial year. A record inflow of remittances also helped in this regard.

Since June 2025, the reserves have kept improving gradually. The forex reserves stood at $14.5 at the time and hovered around the same figure for the next three years. The reserves broke this barrier by registering $15.88bn on Dec 12. Over the next 20 days, the reserves crossed the $16bn mark, placing the country in a comfortable position, for now.

Published in Dawn, January 9th, 2026