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The State Bank of Pakistan (SBP) has revealed that its dollar purchases from the open market since June 2024 totaled $7.8 billion, raising foreign exchange reserves to $14.5 billion by the end of June 2025. The move has strengthened external stability but also prevented a sharper appreciation of the rupee, which could have fueled higher imports.
SBP Deputy Governor Dr. Inayat Husain, while briefing the National Assembly’s Standing Committee on Finance and Revenue, said these SBP dollar purchases were carried out to absorb surplus liquidity and build reserves. He noted that without such interventions, the rupee would have appreciated significantly, benefiting imports but putting additional pressure on exports.
He stressed that stronger reserves allow Pakistan to meet external obligations without depending on new foreign loans. Although the rupee recently faced pressure from a current account deficit, unlike the surplus recorded last year, he said coordinated measures by the government and SBP have started easing this strain.
Responding to committee chairman and former finance minister Syed Naveed Qamar, Dr. Inayat explained that the rupee was currently fairly valued according to the Real Effective Exchange Rate (REER) model. He added that future exchange rate trends would depend on foreign inflows and market dynamics.
Monetary Policy Holds at 11% Amid Inflation Risks
Turning to monetary policy, he said the current policy rate remains at 11 percent. While critics argue for deeper cuts, the central bank has adopted a cautious stance to avoid repeating cycles of overheating and subsequent economic crashes. He pointed out that core inflation stands at 7.4 percent and headline inflation at 4 percent, but risks from rising wheat, oil, and energy costs, along with new taxes, could push inflation upward.
He cautioned that inflation may edge higher in the coming months due to the low base effect and external shocks, though it is expected to remain within the SBP’s target band of 5 to 7 percent in the medium term. Emphasizing the importance of both price and financial stability, he said building reserves is essential for resilience against crises.
At present, Pakistan’s reserves provide 2.3 months of import cover. The SBP’s goal is to raise this to at least three months while also creating additional buffers to absorb unforeseen shocks. Dr. Inayat concluded that while economic growth may be gradual, the priority is to ensure it remains sustainable.
