Pakistan’s central bank, the State Bank of Pakistan (SBP), increased the nation’s foreign exchange reserves by $4.2 billion throughout 2025. However, the rate of growth slowed considerably in the latter half of the year, raising questions about future economic stability.
Reserves Growth and Composition
Official data indicates that SBP’s reserves climbed from $11.7 billion on January 3, 2025, to $15.915 billion by the end of December. While this represents a substantial increase, the second half of the year saw only a $1.4 billion gain, rising from $14.5 billion on June 30th. A significant portion of these reserves are comprised of loans obtained from other countries.
The SBP aims to increase reserves beyond $18 billion by the end of fiscal year 2026. Despite record remittance inflows, which provided opportunities for dollar purchases, reserve growth has remained modest. The central bank purchased $4.2 billion from the market during the first nine months of 2025, a lower volume than the $9.7 billion purchased over the previous 16 months.
Economic Impact and Future Challenges
The increase in reserves has contributed to exchange rate stability, helping to maintain a relatively steady economy despite weak economic growth and rising poverty. Exchange Companies Association of Pakistan Chairman Malik Bostan noted that 2025 was more stable than 2024, with the rupee remaining firm against the US dollar, and that volatility had been contained since previous agreements with the IMF.
However, analysts caution that the latter half of FY26 (January-June) could present challenges. These include managing large loan rollovers, reducing the trade deficit, stimulating GDP growth, and creating employment opportunities for both skilled and unskilled workers. Economists also point out that attracting sufficient domestic and foreign investment remains a key obstacle to economic revival, despite the improved exchange rate and reserve levels.
As of December 26, 2025, the SBP reported a $13 million increase in reserves, bringing the total to $15.915 billion. Total liquid foreign reserves held by the country reached $21.012 billion, including $5.097 billion held by commercial banks.
Frequently Asked Questions
What was the total increase in SBP’s foreign exchange reserves during 2025?
The SBP increased its foreign exchange reserves by $4.2 billion during calendar year 2025.
How did the pace of reserve accumulation change throughout the year?
The pace of accumulation slowed in the second half of 2025, with only $1.4 billion added to reserves between June 30 and December 31, compared to a $2.8 billion increase in the first half of the year.
What concerns have been raised regarding the country’s reserves?
Analysts have expressed concern about the slower accumulation of reserves in recent months and the fact that a significant portion of the reserves are comprised of loans from friendly countries.
Given the challenges ahead, what steps might be necessary to ensure Pakistan’s long-term economic stability?
