Pakistan’s foreign exchange reserves, held by the State Bank of Pakistan (SBP), hit a five-week high above $8 billion as the central bank apparently absorbed surplus US dollars in the inter-bank market.

Healthy inflows of foreign currency helped the rupee gain Rs0.02, which closed at a new five-month high at Rs278.39/$ in the inter-bank market.

In the open market, the currency surged Rs0.22 and reached Rs280.90/$, according to the Exchange Companies Association of Pakistan (ECAP).

In addition, gold climbed to a six-and-a-half-month high at Rs232,400 per tola (11.66 grams) in line with the trend in global markets where the precious metal touched a new peak.

According to the latest weekly update released by the SBP, its foreign exchange reserves increased $105 million to $8.02 billion in the week ended March 15, 2024.

The reserves improved apparently in the wake of bank buying of US dollars in the inter-bank network, where supply of the foreign currency remained higher than its demand.

Exporters have continued to sell the greenback on futures counters while overseas Pakistanis have sent higher remittances to their family members and friends back home to help them meet increasing expenditures during the fasting month of Ramazan and the Eid festival. Meanwhile, the foreign exchange reserves held by commercial banks increased $134.4 million to $5.37 billion.

Accordingly, the total reserves held by the country rose $239.4 million and stood at $13.39 billion in the week ended March 15, 2024.

The gradual increase in the country’s reserves, coupled with a successful last review under the International Monetary Fund’s (IMF) $3 billion standby arrangement and talks for a new and larger loan programme, supported the Pakistani rupee to remain firm in both currency markets.

On the other hand, gold price surged Rs4,600, pushing the commodity to a six-and-a-half-month high at Rs232,400 per tola. Bullion soared $20 to $2,225 per ounce (31.10 grams) in the international market after the US central bank left its benchmark interest rate unchanged at significantly higher levels at 5.25-5.50%, but hinted at three rate cuts in calendar year 2024.

Published in The Express Tribune, March 22^nd, 2024.

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