Pakistan central bank steps up dollar buying as reserves targets rise

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Pakistan dollar reserves rise

Highlights

State Bank of Pakistan bought a total of $17.2 billion from the interbank market between June 2024 and July 2026, lifting gross reserves by $15.3 billion since January 2023.
SBP has set new targets, aiming for $45 billion in remittances in FY2027 and gross reserves of $23 billion by December 2026 and $25 billion by June 2027.
Authorities prioritize a stable rupee despite a real effective exchange rate of 109, potentially capping economic growth below 4% unless managed currency adjustment occurs.

Reserve accumulation strategy gains pace

As reported by Business Recorder, the State Bank of Pakistan, or SBP, has bought dollars aggressively from the interbank market to rebuild its external buffers and improve the country’s import cover. The article says gross reserves have risen by $15.3 billion from January 2023 to June 2026, while forward liabilities have fallen by almost $4 billion, taking the overall improvement in the external position to $22.5 billion.

Over the same period, Pakistan’s total external debt and liabilities have increased by $10.2 billion, implying that the net gain of more than $9 billion is attributed to interbank market purchases. The latest official data show SBP bought $863 million from the interbank market in July 2026 despite a current account deficit of $445 million, after purchases of $841 million in June 2026 when the current account deficit stood at $836 million.

From June 2024 to July 2026, official data cited in the article show SBP bought $17.2 billion from the interbank market. The article also cites remarks by the SBP governor at a post-monetary policy press conference saying the central bank has bought $30 billion from the interbank market over the last four years, with around $12 billion used for interest payments and the remainder used to build reserves.

Pressure on banks and growth outlook

SBP is effectively requiring banks to surrender end-of-day foreign currency surpluses, forcing treasuries to source dollars internally from exports and remittances to finance imports and other payments, according to the article. Banks are charging higher rates for imports and offering remittance discounts of about Rs2 to Rs2.5 per dollar, which the article says is supporting remittance flows through formal channels.

The improvement in inflows has also been helped by a slowdown in money outflows linked to war-related market disruption, while the crackdown on the informal market has strengthened banks’ position in competing for remittances. Against that backdrop, SBP has raised its fiscal 2027 remittances target to $45 billion and increased its reserves targets to $23 billion for December 2026 and $25 billion for June 2027.

The article argues that continued reserve accumulation has helped Pakistan move away from the brink of default, navigate the current oil crisis and contain inflation alongside positive real interest rates and a stronger fiscal position. However, it says the authorities’ preference for a stable rupee, despite a real effective exchange rate of 109, may limit economic growth to below 4% unless the currency is allowed to adjust while market volatility is managed.

In our earlier article on Pakistan’s push to expand priority-sector lending, we covered Prime Minister Shehbaz Sharif’s directive for banks to step up financing for housing, agriculture and SMEs in exchange for access to government incentives. The piece outlined targets to lift farm and SME credit to Rs1.5 trillion each by June 2027, alongside plans to speed up housing-loan processing and introduce regulatory and risk-sharing reforms to unlock broader access to formal credit.

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