Farooq Awan

Pakistan’s foreign exchange reserves showed a marked improvement, reaching $21.0 billion by mid-December 2025, reflecting strengthening external buffers and improved balance of payments management, according to the Monthly Economic Update and Outlook for December 2025 released by the Finance Division.

The report stated that the increase in reserves was driven by a combination of higher remittance inflows, improved current account dynamics and continued external financing support. Of the total reserves, $15.9 billion were held by the State Bank of Pakistan (SBP), while $5.1 billion were maintained by commercial banks, highlighting improved liquidity across the financial system.

The rise in foreign exchange reserves was supported by sustained inflows from overseas Pakistanis, which continued to provide a stable source of foreign currency. Remittances remained a key contributor to external stability, helping offset pressures from imports and supporting the overall balance of payments position. In addition, official inflows related to multilateral and bilateral financing also contributed to reserve accumulation during the period.

The report noted that improved reserve levels strengthened Pakistan’s capacity to meet external payment obligations and enhanced confidence in the country’s macroeconomic outlook. The accumulation of reserves also provided a buffer against external shocks, including volatility in global commodity prices and fluctuations in international financial markets.

Exchange rate stability was another positive development highlighted in the report. The Pakistani rupee remained broadly stable during the review period, supported by improved dollar inflows and disciplined demand management. The stabilization of the exchange rate helped contain imported inflation and provided greater certainty for businesses engaged in trade and investment.

The Finance Division observed that improved reserve adequacy reflected the combined impact of prudent macroeconomic management, fiscal consolidation and effective coordination between monetary and fiscal authorities. The strengthening of the external position was further supported by improvements in export performance, steady growth in services exports and reduced pressure from external debt servicing.

Looking ahead, the report emphasized that maintaining adequate foreign exchange reserves remains a policy priority to safeguard economic stability. Continued efforts to boost exports, attract foreign investment and sustain remittance inflows are critical to preserving external sector resilience. The government reiterated its commitment to strengthening external buffers and ensuring long-term balance of payments sustainability.

Credit: INP-WealthPk