SBP’s foreign exchange purchases fall to 16-month low in May

The State Bank of Pakistan (SBP) purchased $154 million from the interbank foreign exchange market in May, marking its lowest monthly purchase since January 2025, according to central bank data.

 

The latest purchase was significantly below the $635 million acquired in April. Despite the slowdown, the SBP purchased around $7.3 billion from the market during the first 11 months of fiscal year 2026, slightly higher than the $7.2 billion recorded during the corresponding period of the previous fiscal year.

 

Awais Ashraf, Director of Research at AKD Securities, attributed the sharp decline in May purchases to increased demand for foreign currency in the open market from Pakistanis travelling to Saudi Arabia for Hajj.

 

He said tighter dollar availability prompted the central bank to reduce its purchases in order to avoid placing additional pressure on the rupee.

 

The SBP generally purchases surplus foreign currency from the market to strengthen its reserves and support the country's external debt-servicing requirements.

 

Forex reserves strengthen

 

The SBP's foreign exchange reserves stood at around $17.2 billion at the end of May, supported by stronger remittance inflows and a relatively contained current account deficit.

 

The central bank has continued efforts to build its external buffers through foreign exchange market interventions, with its reserves projected to surpass $21 billion during FY27.

 

Pakistan's external position has also benefited from rising remittances and improving export performance. Workers' remittances exceeded $41 billion in FY26 and are projected to reach approximately $44 billion in FY27.

 

The current account deficit narrowed to $328 million in July, declining 60% month-on-month and 38% year-on-year. The SBP expects the current account deficit to remain within 0–1% of GDP in FY27.

 

The Finance Ministry said external sector conditions were expected to remain broadly supportive, citing improved exports, particularly textiles, sustained remittance inflows and continued measures to facilitate exporters.

 

These developments, it added, should help limit pressure on the balance of payments and support the adequacy of Pakistan's foreign exchange reserves.