SBP’s Dollar Buys and Policy Measures Support PKR Stability

October 29, 2025 (MLN): The State Bank of Pakistan (SBP) continued to purchase U.S. dollars from the interbank foreign exchange market in July 2025, albeit at a slower pace than in previous months.

Data released by the central bank showed net purchases totaling USD 189 million during the month. The SBP defines Net FX Intervention as outright and swap purchases of foreign exchange minus outright and swap sales conducted with banks in the interbank market.

Since the data series was first published in June 2024, the SBP has accumulated net purchases of USD 8,446 million (or USD 8.446 billion), reflecting an aggressive push to rebuild reserves and stabilize the exchange rate.

As of July 31, 2025, the SBP’s foreign exchange reserves stood at USD 14,324 million, up sharply from USD 9,221 million a year earlier and only slightly lower than USD 14,506 million at end-June 2025. This represents a remarkable recovery from the all-time low of USD 2,917 million recorded in early February 2023, highlighting the effectiveness of the SBP’s reserve-building strategy under the ongoing stabilization program.

The PKR had depreciated consecutively for nine months, falling from PKR 277.71 per USD in September 2024 to PKR 283.76 in June 2025, a net decline of 6.05 PKR (-2.13%). In July 2025, however, the rupee reversed course slightly, appreciating by 0.32% to close at PKR 282.87. This modest recovery indicates that the central bank’s interventions had begun to temper volatility and support orderly market conditions.

The SBP’s interventions in July occurred against a backdrop of significant external obligations. According to its June 30 liquidity report, Pakistan’s foreign currency assets are expected to see a net outflow of USD 30.18 billion over the next 12 months, including USD 2.12 billion due within the next month. The bulk of these outflows consist of principal repayments totaling USD 26.44 billion, with interest payments of USD 3.74 billion. Of the total obligations, USD 2.12 billion is payable within one month, USD 2.86 billion between one and three months, and USD 25.2 billion within the remainder of the year. These short-term net drains reflect contractual foreign currency obligations and underscore the importance of SBP’s continued interventions to maintain adequate reserves and support orderly market conditions.

Pakistan’s external position continues to exert pressure on the rupee, despite improvements in the overall balance of payments. The current account recorded a surplus of USD 1.932 billion in FY25, compared with a deficit of USD 2.072 billion in FY24, reflecting a modest improvement in trade flows and remittances. However, at a monthly level, the current account remained in deficit, with USD 379 million in July 2025, slightly higher than the USD 355 million deficit in July 2024, highlighting ongoing short-term pressures on foreign exchange demand.

Administrative Measures and Incentives for FX Stability

In addition to market interventions, the SBP continued to employ administrative measures aimed at both restricting outflows and incentivizing inflows.

Controlling Outflows: The central bank maintained a tight grip on dollar outflows, particularly those related to imports. While these controls are designed to manage the current account deficit, they have created challenges for importers, who have reported delays in accessing foreign exchange for business operations.

Implementing Structural Reforms: Key regulatory changes were finalized, including reforms to foreign exchange companies. The SBP credited these steps with enhancing stability and transparency in the broader FX market.

Incentivizing Inflows: To encourage remittances through formal channels, the SBP introduced incentive schemes, including reimbursement of transfer charges, aimed at reducing reliance on informal transfer systems such as hundi and hawala.

These administrative steps were complemented by revisions to key chapters of the Foreign Exchange Manual—covering exports, imports, and remittances—underscoring the SBP’s commitment to regulating foreign currency flows in support of macroeconomic stability and the broader economic reform agenda.

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