Why record reserves are not worth celebrating yet

September 09, 2026 (MLN): Pakistan's central bank has never held this many dollars. On September 18, the State Bank's reserves stood at $21.40 billion, comfortably above the previous peak of $20.07 billion set in August 2021. It is a genuine milestone. It is also a slightly misleading one, because almost none of that money was earned.

In the first week of September, the government took a $1.21 billion commercial loan. A week later, $3.06 billion arrived from a Eurobond sold to foreign investors. That is $4.27 billion of borrowed money in a fortnight.

Strip it out, and reserves would be about $17.13 billion, roughly $1.25 billion lower than on June 30, when the fiscal year began.

Put simply, without September's borrowing, Pakistan's dollar savings would have shrunk this year, not grown. And once the loans stopped landing, the momentum vanished. In the week to September 18, reserves rose by a mere $11 million.

Borrowing is not free, either. The new bonds carry interest of 7.50% and 7.90%, which comes to about $230 million a year. Last week's gain covers roughly 18 days of that bill.

The leaky bucket

The State Bank does earn dollars too, buying them from local banks when exporters and families sell theirs. Between July 2025 and May 2026, it bought $7.26 billion. Yet reserves grew by only $2.68 billion over the same stretch. The remaining $4.6 billion or so drained straight back out, mostly to repay foreign loans.

It's a bucket with a hole in the bottom. You can pour in as much as you like, and the level barely rises.

The Son in Dubai

The good news is that the current account deficit, the gap between all the money flowing in and out of the country, shrank to $543 million in July and August, down from $853 million a year earlier. The less comforting news is why.

Pakistan's trade gap is actually widening. Imports rose 11.3%, while exports grew just 4%. What papered over the difference was remittances, the money Pakistanis abroad send home. They rose $934 million to $7.29 billion in two months, and that single source absorbed 95% of the worsening trade gap. Our external account is being held together by overseas workers, not by what we sell to the world.

Same fuel, fatter bill

Oil explains half of August's rise in imports. The petroleum bill climbed 23.6% to $1.47 billion. That was not because Pakistan bought much more fuel. Each tonne of crude simply cost 34% more than a year ago. With Brent at $103 a barrel, against roughly $70 before the Middle East conflict, that pressure is not easing anytime soon.

Take

To be fair, the Eurobond was well executed. Borrowing for five and ten years lowers the risk of a sudden repayment squeeze, and the finance ministry deserves credit for that.

But borrowing dollars proves only that lenders trust Pakistan again. It does not prove the economy is earning enough on its own, and we have confused the two before. Reserves peaked at $18.9 billion in October 2016, then slid to $9.8 billion by June 2018. They reached $20.1 billion in August 2021, then collapsed to $4.4 billion by June 2023.

A little more candour from the State Bank would not hurt either. It publishes its dollar-buying data roughly three months late; May's figures appeared only on August 31. On September 14, it credited "significant FX purchases" for the record, yet nobody can verify that until around December. If a number is used to justify a policy decision, it deserves timely publication.

In simple words, think of the reserves as Pakistan's dollar savings account. Money comes in two ways. We earn it, through exports and remittances that the State Bank then buys, or we borrow it, as we did in September.

Money goes out in two ways too. The first is repaying old loans, with about $21.5 billion due this year. The second is paying for oil and other imports, which have become pricier because of the war.

Most of what we earn goes straight back out on old debts and a costlier fuel bill. The account only jumps when a fresh loan arrives.

So yes, the record is real. But the day worth celebrating is the day the account grows without a single new loan behind it. We are not there yet.

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