SBP rebuilt reserves without new debt

Forward liabilities cut to under $1b from $5.7b; external debt barely rose in three years SBP Governor Jameel Ahmed during a press conference. Photo: SBP Meta State Bank of Pakistan (SBP) foreign exchange reserves recovered from less than $3 billion in February 2023 to $21.5 billion by October 9, 2026, and the build came from the central bank's own foreign exchange purchases rather than new borrowing, with the external debt stock rising only marginally over the last three years, Governor Jameel Ahmad told foreign investors at the International Monetary Fund (IMF) and World Bank annual meetings in Bangkok. SBP's forward liabilities were reduced from over $5.7 billion to less than $1 billion, he said, according to a statement issued on Saturday. The FX purchases were facilitated by an almost balanced current account in FY26. The governor held meetings with senior executives from JP Morgan, Citibank, Jefferies, Deutsche Bank, Barclays, Bank of America, MSCI, Standard Chartered and Mitsubishi UFJ Financial Group from October 12 to 17, along with bilateral and multilateral partners, other central banks and global credit rating agencies. He said the economy has become more resilient to domestic and external shocks as a result of sustained macroeconomic policies and structural reforms. Inflation declined sharply from elevated levels in FY23 to almost within the target range in FY26 despite the significant oil price shock. Real gross domestic product (GDP) growth, after contracting in FY23, reached 3.7% in FY26 and is projected at 3.5% to 4.5% in FY27. Regulatory reforms, especially for exchange companies and to encourage channelling of remittances through formal channels, have improved interbank foreign exchange liquidity, he said. Foreign exchange purchases are expected to continue, with the current account deficit projected to remain within 0% to 1% of GDP in FY27. The fiscal position has also strengthened, with the primary fiscal balance posting a third consecutive annual surplus in FY26, putting the public debt-to-GDP ratio on a downward trajectory. A staff-level agreement has been reached with the IMF for the Extended Fund Facility (EFF) and Resilience and Sustainability Facility (RSF) reviews. Continued implementation of the reform agenda has improved investor confidence, led to sovereign credit rating upgrades and facilitated Pakistan's access to global capital markets despite a challenging global environment. He emphasised that Pakistan's economic fundamentals remain strong, supported by a prudent policy mix that has cushioned the impact of multiple shocks over the last three years. While ongoing geopolitical developments pose challenges, he said the economy is in a significantly better position to withstand this shock than during previous periods of external stress. The governor reaffirmed SBP's commitment to safeguarding hard-earned macroeconomic stability, strengthening external buffers and advancing structural reforms for sustainable economic growth.