The State Bank of Pakistan (SBP) significantly reduced its dollar purchases from the interbank foreign exchange market in May, with purchases falling to $154 million, the lowest monthly level since January 2025.
According to central bank data, the SBP purchased $635 million from the interbank market in April. Despite the sharp decline in May, the central bank’s total dollar purchases during the first 11 months of fiscal year 2026 reached $7.3 billion, slightly higher than the $7.2 billion recorded during the same period of the previous fiscal year.
Market analysts attributed the decline in May purchases to increased demand for US dollars in the open market, particularly from people traveling to Saudi Arabia for Hajj.
The tighter availability of dollars encouraged the SBP to reduce its purchases from the interbank market to avoid creating additional pressure on the Pakistani rupee.
The central bank typically purchases surplus foreign currency from the interbank market to strengthen its foreign exchange reserves and support external debt servicing requirements. SBP foreign exchange reserves stood at $17.2 billion at the end of May.
Higher remittances and a relatively narrow current account deficit have continued to support Pakistan’s external position. The SBP has also been strengthening its reserves through foreign exchange market interventions.
The country’s current account deficit fell to $328 million in July, declining 60% from the previous month and 38% compared with the same month a year earlier.
The SBP expects Pakistan’s current account deficit to remain between zero and 1% of GDP in fiscal year 2027, indicating continued stability in the external sector.
Remittances from overseas Pakistanis exceeded $41 billion in fiscal year 2026 and are projected to reach $44 billion in fiscal year 2027.
The Finance Ministry expects external sector conditions to remain broadly supportive, helped by stronger exports, particularly textile exports, sustained remittance inflows, and continued measures to facilitate exporters.
Meanwhile, Pakistan’s foreign exchange reserves are expected to exceed $21 billion during fiscal year 2026, supported by improving external account conditions and continued reserve accumulation.
The decline in SBP dollar purchases in May therefore reflects tighter market conditions and increased demand rather than a broader reversal in the central bank’s reserve-building strategy.
