Foreign exchange reserves hit record $21.4bn after Eurobond inflows

The central bank said its foreign exchange reserves increased to $21.399 billion during the week ended September 11 after proceeds from the recently issued Eurobonds were received., approximately $3.06 billion generated through the international bond issuance was added to the country’s official foreign exchange reserves during the week.

The inflows pushed Pakistan’s total liquid foreign exchange reserves above $26.79 billion, including reserves held by both the central bank and commercial banks. Commercial banks held foreign exchange reserves of approximately $5.402 billion,. The substantial increase in the SBP’s holdings provides Pakistan with a larger foreign exchange buffer for meeting external payment requirements, including debt servicing and imports.

The level of official reserves is closely monitored because it is an important indicator of a country’s external liquidity position. Higher reserves generally provide greater capacity to absorb external payment pressures, although their sustainability also depends on future inflows, imports, debt repayments and the current-account position.

The latest increase was primarily driven by the Eurobond proceeds rather than solely by foreign exchange generated through exports, remittances or other recurring external inflows. Pakistan’s return to international bond markets and the resulting inflow have therefore produced a significant one-time addition to the central bank’s reserves.

The higher reserve position may also provide additional support to overall external-sector stability, though future trends will depend on the balance between foreign currency inflows and outflows.

The government and the SBP have been seeking to strengthen the country’s external position through a combination of multilateral and bilateral financing, overseas borrowing, exports, remittances and measures aimed at maintaining foreign exchange liquidity.

With the latest Eurobond proceeds incorporated into the SBP’s holdings, the country’s combined liquid foreign exchange reserves now stand at their highest level in recent years, while the central bank’s own reserves have reached a record level.