Pakistan's forex reserves drop $1.3 billion on heavy debt payments

The State Bank of Pakistan's (SBP) foreign exchange reserves fell by $1.305 billion in the week ending June 19, declining to $15.916 billion from $17.221 billion a week earlier. The decrease was primarily attributed to substantial external debt repayments, highlighting the persistent pressure of debt servicing on the country's external account despite anticipated inflows later in the month.

Despite the weekly drop, Pakistan's total liquid foreign exchange reserves stood at $21.484 billion as of June 19. The SBP held $15.916 billion of this total, while commercial banks accounted for $5.568 billion in net foreign reserves. The central bank linked the decline to scheduled external debt repayments but expressed confidence that the reserve position would improve before the close of the fiscal year.

The SBP expects a significant boost from $700 million in inflows from multilateral financial institutions, along with nearly $1.7 billion through the refinancing of a government commercial loan. These inflows are projected to be reflected in the reserve figures by June 30, helping to offset the recent decline. The central bank maintains its projection of ending FY2025-26 with approximately $18 billion in foreign exchange reserves.

The latest numbers underscore the persistent challenge of balancing debt obligations with reserve accumulation, even as Pakistan relies on fresh external financing to strengthen its foreign exchange position. The temporary erosion in reserves is seen as manageable given the expected inflows.

Pakistan's total public debt reached Rs80.5 trillion by the end of June 2025, including Rs54.5 trillion in domestic debt and Rs26 trillion in external debt. The Ministry of Finance reported that public debt stood at 70.7% of GDP, while the country's total external debt and liabilities amounted to around $138 billion, of which approximately $92 billion was external public debt.