Pakistan’s foreign exchange reserves have reached a 22-month high of $9.12 billion following the disbursement of a tranche from the International Monetary Fund (IMF). This surpasses the IMF’s projection for reserves at the end of June 2024.

The State Bank of Pakistan (SBP) reported that the country’s foreign currency reserves experienced a significant boost of nearly 14% or $1.11 billion in the week ending May 3, 2024, after the release of the IMF’s final loan tranche. The reserves now stand close to the level recorded on July 15, 2022, at $9.33 billion.

The IMF had previously estimated that Pakistan’s foreign exchange reserves would reach $9.1 billion by the end of the current fiscal year, which concludes on June 30, 2024.

The SBP stated that the increase in reserves was primarily due to the receipt of $1.1 billion from the IMF as part of the standby arrangement (SBA). With the rise in reserves, Pakistan’s import cover has expanded to 1.72 months, as reported by AHL Research.

Pakistan has received a total of $3 billion under the nine-month SBA, which ended in April 2024. The country has formally applied for a new three-year loan program from the IMF, seeking an amount between $6 billion to $8 billion.

Officials, including Finance Minister Muhammad Aurangzeb and SBP Governor Jameel Ahmad, project that the reserves will reach nearly $10 billion by the end of June. Commercial banks’ reserves also increased by $28.6 million during the reviewed week, reaching $5.34 billion. Overall, total reserves have risen to a 19-month high of $14.46 billion, according to the central bank.

Pakistan’s robust inflows of workers’ remittances and an increase in export earnings have contributed to achieving the IMF’s reserve level target ahead of schedule. In March 2024, remittances reached an almost two-year high of nearly $3 billion as non-resident Pakistanis sent more money to support their families during the high inflation period of Ramazan and the Eid festival.

The central bank has reportedly purchased $5 billion from the domestic market so far in the current fiscal year. The surplus supply of the US dollar compared to the demand has allowed the bank to absorb the excess and bolster the country’s reserves.

Despite the surge in reserves, the Pakistani rupee weakened nominally by Rs0.10 and closed at Rs278.20/$ in the inter-bank market on the day of the reserves’ announcement.

It is anticipated that the currency will continue to trade within a narrow range and remain stable at current levels until the end of June 2024. The rupee has appreciated cumulatively by 10.39% or Rs28.90 in the past eight months, starting from its record low close of Rs307.10/$ in September 2023.

The increase in foreign exchange reserves is seen as a positive development for Pakistan’s economy, providing stability and confidence in its external financial position.