Pakistan Achieves Record Foreign Exchange Reserves Amid Gulf War Turmoil

KARACHI: Pakistan’s foreign exchange reserves have surged to a historic high of over $26.8 billion, as reported by the State Bank of Pakistan (SBP) on Thursday. This remarkable increase comes despite the ongoing Gulf war, which has adversely affected many economies and raised concerns over fluctuating oil prices.

The conflict, which began on February 28, has created economic uncertainty; however, the SBP has successfully bolstered its reserves by more than $5 billion since then. The reserves stood at $16.568 billion in February and have now reached $21.568 billion as of October 30, reflecting a significant recovery.

The SBP’s latest report indicates that both the central bank’s and commercial banks’ foreign exchange holdings have risen, with SBP reserves increasing by $39 million in the past week. Financial analysts view the current reserves as adequate for maintaining exchange rate stability, which is crucial for encouraging exporters to promptly repatriate their earnings and instilling confidence in importers.

Despite these positive developments, currency experts warn that the Pakistani rupee may be overvalued, leading to cheaper dollar access for importers and contributing to a widening trade deficit. For the period of July to October in FY27, the trade deficit reached $14.6 billion, with imports totaling $26 billion against exports of $11.4 billion.