Pakistan Forex Reserves Slip by $10.5 Million to $22.64bn

Pakistan’s total liquid foreign exchange reserves recorded a slight decline during the week ending May 29, 2026, reflecting a modest reduction in the country’s external financial buffers. According to the latest data released by the State Bank of Pakistan (SBP), total reserves stood at $22.636 billion, compared with $22.646 billion a week earlier, showing a decrease of $10.5 million.

While the overall decline was relatively small, the latest figures provide an important snapshot of Pakistan’s external sector position at a time when policymakers continue to focus on maintaining macroeconomic stability and strengthening foreign exchange holdings.

SBP Reserves Continue to Improve

Despite the drop in overall reserves, the central bank’s own holdings posted an increase during the reporting week. Foreign exchange reserves held by the State Bank of Pakistan rose by approximately $43 million, reaching $17.190 billion.

The increase in SBP reserves is viewed as a positive development because the central bank’s holdings are considered the primary source for meeting external payment obligations, supporting exchange rate stability, and managing import requirements. The growth suggests that official reserve management efforts remain on track despite fluctuations in other components of the country's foreign exchange position.

Commercial Banks’ Holdings Weigh on Overall Reserves

The slight decline in total reserves appears to have been driven by a reduction in foreign exchange holdings maintained by commercial banks. Since total liquid reserves are calculated by combining SBP reserves with the net foreign reserves of commercial banks, changes in banking sector holdings can affect the overall figure even when the central bank's reserves are increasing.

Such weekly movements are common and are often influenced by import payments, foreign currency transactions, corporate settlements, and routine banking operations.

Why Forex Reserves Matter

Foreign exchange reserves play a critical role in Pakistan’s economic stability. They provide the country with the ability to meet external debt obligations, pay for imports, and support confidence in the domestic currency.

A healthy reserve position also strengthens investor confidence and improves the country’s ability to manage external economic shocks. Economists closely monitor reserve levels because they serve as a key indicator of a nation’s financial strength and its capacity to withstand global market volatility.

For Pakistan, maintaining strong reserves remains especially important as the country seeks to sustain economic recovery, attract foreign investment, and improve its external account performance.

Outlook for Pakistan’s External Sector

Although the latest data shows a minor decline in total reserves, the increase in SBP-held reserves indicates that Pakistan’s external position remains broadly stable. Recent months have seen gradual improvements in reserve levels, supported by stronger remittance inflows, improved export performance, and continued efforts to strengthen foreign exchange liquidity.

Market participants will continue to monitor future reserve updates, particularly as global economic conditions, oil prices, and international financial flows influence Pakistan’s balance of payments outlook.

The latest figures suggest that while short-term fluctuations are inevitable, the country's reserve position remains significantly stronger than levels seen during previous periods of economic stress.

As policymakers pursue measures aimed at boosting exports, attracting investment, and maintaining fiscal discipline, foreign exchange reserves will remain one of the most closely watched indicators of Pakistan’s economic health.

(Source: Business Recorder)