Key Takeaways
- State Bank of Pakistan's (SBP) foreign exchange reserves dropped to $17.228 billion after servicing external debt.
- The drop is attributed to heavy repayments, despite reaching a record high of $18.4 billion in the previous fiscal year.
- Total liquid foreign reserves for the country fell to $22.675 billion.
KARACHI: The State Bank of Pakistan (SBP) reported a significant drop in its foreign exchange reserves, with figures falling by $1.2 billion to stand at $17.228 billion as of July 10, 2026. This decline comes after the SBP had successfully reached a target of $18.4 billion for fiscal year (FY) 26 but faces challenges in maintaining this level due to upcoming loan rollover processes.
The reduction in reserves is primarily attributed to heavy external debt repayments, which have been a consistent challenge for Pakistan’s financial management. According to the SBP's weekly report issued on Thursday, the country needs over $26 billion for debt servicing in FY27, making it difficult to sustain the previous year's achievement.
The central bank's efforts to rebuild foreign exchange reserves over the past two years have been tested by these repayments. Despite external debt repayments of around $9 billion during the last quarter of FY26, the SBP managed to achieve its reserve target of $18 billion by June 2026.
The decline in SBP’s foreign exchange reserves is not isolated; it also affected commercial banks’ reserves, which fell by approximately $68 million. As a result, the country's total liquid foreign exchange reserves dropped to $22.675 billion during the week ended July 10, 2026, compared to $23.988 billion in the previous week.
The SBP’s achievement of building foreign exchange reserves to $18.47 billion proved short-lived as its reserves fell below the $18 billion mark within a week due to debt servicing. This development highlights the ongoing struggle for Pakistan to maintain adequate foreign exchange reserves, crucial for economic stability and international trade.
The SBP continues to face significant challenges in managing external debt repayments while striving to rebuild its foreign exchange reserves. The central bank will need to navigate these complexities carefully to ensure financial sustainability over the coming fiscal year.
