Central bank boosts FX reserves with $635 million purchase in April

KARACHI: The State Bank of Pakistan purchased $635 million worth of foreign currency from the interbank market in April 2026, bringing the central bank’s total intervention over the past 12 months to $8.13 billion, according to official data released Monday.

The April purchase marked a slight decline from the $667 million acquired in March but remained significantly above the $473 million purchased in April 2025, a year-over-year increase of about $162 million.

“We expect the bank to continue taking proactive measures to build and strengthen foreign exchange reserves,” said an analyst at Topline Securities.

Strong Reserve Accumulation Continues Through FY26

The central bank’s reserve accumulation remained robust throughout fiscal year 2026, though monthly purchases varied considerably. The largest interventions occurred in September 2025 at $1.023 billion, October 2025 at $1.033 billion and December 2025 at $1.024 billion, with each month exceeding the $1 billion mark.

Earlier in the fiscal year, the SBP purchased $189 million in July, $257 million in August, $728 million in January, $933 million in February, $667 million in March and $635 million in April.

By comparison, during the same period of FY25, monthly interventions peaked at $1.151 billion in November 2024 before moderating sharply during the second half of the fiscal year.

The SBP defines net foreign exchange intervention as the value of outright and swap purchases of foreign currency minus outright and swap sales conducted with commercial banks in the interbank market.

Analysts said the continued net purchases suggest the central bank has taken advantage of stronger foreign exchange inflows to rebuild reserves while allowing the exchange rate to remain market-determined.

The intervention data is consistent with Pakistan’s improving external sector. The SBP projects workers’ remittances to reach about $44 billion in FY27, while exports are expected to increase on stronger rice shipments and continued growth in information technology exports. The central bank also expects the current account deficit to remain within 0% to 1% of gross domestic product in FY27 despite stronger domestic economic activity.

The steady accumulation of foreign exchange reserves has helped improve investor confidence and external financing conditions. Pakistan recently secured a sovereign credit rating upgrade from S&P Global Ratings, reflecting improving macroeconomic stability.

Governor Says $6.1 Billion in External Debt Addressed

Pakistan has already repaid or secured rollover arrangements for $6.1 billion of the $21.5 billion in external debt obligations due during fiscal year 2026-27, easing near-term financing pressures as the country strengthens its external position, State Bank of Pakistan Governor Jameel Ahmad said Monday.

Speaking at an analysts’ briefing after the Monetary Policy Committee left the benchmark policy rate unchanged at 11.5%, Ahmad said Pakistan’s external debt obligations for FY27 include $17.6 billion in principal repayments and the remainder in interest payments.

Of the total, $6.1 billion has already been addressed, including $4 billion through rollover agreements, leaving about $15.4 billion to be repaid or refinanced during the rest of the fiscal year.

The Monetary Policy Committee unanimously decided to keep the policy rate unchanged at 11.5 percent in its meeting held on July 27, 2026.
For details: https://t.co/7bQXQaJE5x pic.twitter.com/EyU267x0bL

— SBP (@StateBank_Pak) July 27, 2026

The Monetary Policy Committee unanimously kept the benchmark policy rate unchanged, citing an improving macroeconomic outlook while warning that renewed geopolitical tensions in the Middle East continue to pose risks to inflation and external stability.

Ahmad said Pakistan’s external position has strengthened significantly over the past three years, with the SBP’s foreign exchange reserves increasing six-fold to $18.4 billion at the end of June 2026 from February 2023.

The central bank expects reserves to rise further to $20.2 billion by December 2026, bringing holdings closer to the equivalent of three months of imports.

Pakistan recorded a current account deficit of $139 million in FY26, near the lower end of the SBP’s projected range. The central bank expects the deficit to widen modestly as economic activity strengthens but remain within 0% to 1% of gross domestic product during FY27.

Ahmad said higher global commodity prices, rising production costs and domestic food prices are likely to keep inflation above the central bank’s target range in the coming months. However, inflation is expected to ease gradually during FY27 and settle within the SBP’s 5% to 7% target range, near the upper end, provided global energy markets remain stable and there are no major shocks from administered prices or adverse weather.

Headline inflation slowed to 11.1% in June from 11.7% in May, while core inflation eased to 8.4% from 8.7%, reflecting moderating underlying price pressures.

Ahmad reiterated that Pakistan operates a market-based exchange rate regime and that the SBP does not target a specific exchange rate. He said the real effective exchange rate stands at about 106, reflecting Pakistan’s relatively higher inflation than its trading partners, although easing domestic inflation should reduce pressure over time.

He also welcomed S&P Global Ratings’ recent upgrade of Pakistan’s sovereign credit rating to B from B-minus, saying it reflected improved macroeconomic stability and prudent economic policies. The upgrade has helped lower Pakistan’s external risk premium, with five-year credit default swap spreads narrowing and Eurobond yields declining across maturities.

The governor reaffirmed the SBP’s forecast for economic growth of 3.5% to 4.5% in FY27 but said the outlook remains dependent on agricultural performance, evolving El Niño weather conditions and geopolitical developments in the Middle East.

He said economic activity slowed during the final quarter of FY26 because of regional conflict, higher energy prices and fiscal tightening. However, high-frequency indicators, including automobile sales, cement dispatches, fertilizer offtake, satellite data and business confidence surveys, suggest the economy began recovering in June.

On public finances, Ahmad said the Federal Board of Revenue achieved its revised 13 trillion Pakistani rupee tax collection target in FY26, while Pakistan recorded a primary fiscal surplus for a third consecutive year and significantly reduced its overall fiscal deficit.

The SBP expects fiscal consolidation to continue in FY27, targeting a primary surplus of 2% of gross domestic product and an overall fiscal deficit of 3.6% of gross domestic product. Ahmad said broadening the tax base and reducing losses at state-owned enterprises remain critical to sustaining fiscal stability.

The governor also said the SBP expects to transfer about 1.4 trillion Pakistani rupees in profits to the federal government for FY26, subject to completion of the central bank’s external audit.

Addressing food security concerns, Ahmad said the government had approved the import of 1 million metric tons of wheat as a precautionary measure and that existing wheat inventories remain sufficient. The SBP’s FY27 forecast assumes agricultural growth of below 3%.

Asked about reports of a proposed $10 billion financing package from the United States, Ahmad declined to comment, saying the Ministry of Finance was better placed to discuss any negotiations or potential terms.