Pakistan central bank reserves rise to $14.51 billion, surpass IMF target
The new figure exceeds the International Monetary Fund's (IMF) June 2025 reserves target under Pakistan's ongoing $7 billion Extended Fund Facility (EFF), and reflects a significant turnaround in the country's external account after years of balance-of-payments stress.
Pakistan's forex reserves stood at $9.39 billion at the end of FY24, and have now climbed to their highest level since early 2018. The increase also pushes Pakistan's import cover — a key indicator of external sector strength — to 2.5 months, up from 1.7 months a year ago and less than one month during the 2022-23 crisis period.
The rise in reserves was driven largely by non-debt inflows, including improved exports, growth in IT services, higher foreign direct investment, and record remittances from overseas Pakistanis, according to government finance adviser Khurram Schehzad.
'Reserves rising. Debt falling. Stability strengthening,' Schehzad posted on X, formerly Twitter, noting that the central bank's reserves now exceed the IMF's end-June target.
He added that the debt-to-GDP ratio has declined from 75 percent in FY23 to an estimated 69 percent in FY25, reflecting improved macroeconomic management.
Pakistan entered FY25 facing a challenging external financing outlook, with over $20 billion in debt repayments due during the year. However, a combination of improved current account discipline, fiscal consolidation, and bilateral inflows helped ease pressure on the rupee and shore up confidence in the central bank's position.
Pakistan's economy grew an estimated 2.4 percent in FY25, up from 0.3 percent in the previous fiscal year, as inflation cooled and the rupee stabilized after a steep depreciation cycle in 2022-23. The IMF has encouraged Pakistan to maintain exchange rate flexibility and strengthen domestic revenue collection in order to ensure macroeconomic resilience.
The improvement in external buffers is likely to boost investor sentiment at a time when the government is stepping up efforts to attract foreign direct investment and privatize state-owned enterprises.
Further inflows, particularly from Gulf countries and China, are expected in the first half of FY26, which could help Pakistan meet its gross financing needs without resorting to expensive commercial borrowing.
Despite the progress, risks remain. Pakistan's external debt servicing burden remains high, and its ability to maintain reserve adequacy will depend on continued inflows and fiscal discipline.
Still, the end-June reserve level marks a notable turnaround from just two years ago when Pakistan was on the brink of default and foreign reserves had fallen below $4 billion, barely enough for three weeks of imports.
With reserves now exceeding $14.5 billion, the country has gained critical breathing space to manage its external obligations and restore market confidence.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Arab News
3 hours ago
- Arab News
Pakistan pushes ahead with agri bank privatization under IMF-backed reform plan
KARACHI: The government on Thursday appointed a consortium of financial advisers for the sale of Zarai Taraqiati Bank Limited (ZTBL), a state-owned agricultural lender, according to an official statement. The decision, made during a meeting of the Privatization Commission (PC) Board chaired by Muhammad Ali, Adviser to the Prime Minister, signals the government's intent to fast-track key transactions under its broader economic reform program. The board approved the selection of a consortium led by Next Capital Limited, which ranked highest among six qualified bidders. 'ZTBL is among the priority transactions in the current privatization pipeline. The appointment of a top-tier consortium of FAs [financial advisers] reflects the government's strong commitment to executing the process in a professional, transparent and timely manner,' the Privatization Commission said in a statement. Pakistan's privatization program, long encouraged by the International Monetary Fund (IMF) under various loan arrangements, is aimed at reducing fiscal losses from poorly performing state-owned enterprises (SOEs), improving governance and boosting private sector participation. The IMF has repeatedly called for structural reforms, including divestment from commercial entities, to ease pressure on public finances and strengthen the country's economic outlook. Alongside the appointment, the PC Board also approved the formation of a Negotiation Committee to finalize the Financial Advisory Services Agreement (FASA) with the selected consortium. Other shortlisted bidders included major consortiums led by Arif Habib Limited, A.F. Ferguson, AKD Securities, Bridge Factor and JS Bank. ZTBL provides agricultural credit and rural banking services across Pakistan. Its privatization is seen as part of a broader effort to reform the financial sector and reduce the state's commercial footprint.
Arab News
3 hours ago
- Arab News
Utility Stores employees vow resistance as government plans shutdown from July 10
ISLAMABAD: The Utility Stores Corporation (USC) employees' union on Thursday vowed to resist the government's decision to shut down retail operations by July 10, saying it would fight for the rights of over 11,000 workers by initiating protests, sit-ins and legal action. Established by the government in 1971, the corporation has a nationwide chain of retail outlets that provide essential commodities to the general public at prices lower than those in the open market. The corporation took over 20 retail outlets at the beginning but now operates 6,000 stores across the country. The government allocated Rs65 billion ($229.7 million) to subsidize the products sold by the retail chain in the last fiscal year. One of its spokespersons confirmed to Arab News the corporation's public retail stores will be closed by July 10, adding that all operations will shut down by the end of the month. 'We have received instructions from the Ministry of Industries and Production to close down all the stores by July 10, shift remaining goods to warehouses and completely shut down operations by July 31, 2025,' Sajid Marwat, USC Public Relations Officer, said. Meanwhile, Arif Shah, Secretary General of the All Pakistan Workers Alliance of Utility Stores, said the union will use all available avenues to protect the corporation and its employees. 'We will pursue both options, challenging the decision in court and staging on-ground protests including a sit-in at the [USC] headquarters,' he told Arab News. 'In total, around 17,000 people — including 11,500 direct employees of Utility Stores, 2,000 to 2,500 vendor staff and 3,000 franchise store workers from 1,000 to 1,200 outlets — will be affected by the closure,' Shah said, adding the authorities had already terminated around 4,100 employees. He maintained the institution has remained in existence for 55 years, and shutting it down was not the government's sole prerogative. 'If it is truly necessary to close this institution, the decision should be approved by parliament,' he said. Shah noted that during emergencies and disasters, the corporation stood at the forefront to provide relief items and ensure food security due to its big presence all over the country. He pointed out if the government was determined to shut it down, then at the very least, the employees should be given a fair and respectable voluntary separation scheme (VSS) package to help absorb the financial shock. Asked about the possibility of offering such a proposal, USC spokesperson Marwat said a human resource committee would convene on Friday to review the issue in consultation with union representatives and the management. 'The union is not accepting the current terms as they are demanding compensation packages for everyone, including daily wage laborers and contractual staff, as all categories of workers are being affected,' he informed, adding that the government was considering a financial deal for regular employees. Under the package for regular staff, the government is planning to offer two or three month of basic salary. 'But based on mutual consultations, the committee will prepare a comprehensive package for the outgoing employees,' he added. Raja Miskeen, a USC employee for over two decades, termed it completely wrong to shut down Utility Stores, saying it would put the livelihood of thousands of employees like him and their families at risk. 'We are waiting for the official written order, after which we will challenge this move in court,' he told Arab News. 'We are also in contact with our unions, urging them to develop a joint strategy that includes protests, sit-ins in the federal capital and legal action,' he added. Miskeen said the employees have dedicated many years to the corporation, adding that it had been functioning well. 'We are not against restructuring or improving its operations, but a complete shutdown is simply unacceptable,' he added. Ayesha Anwar, a regular customer at the USC in Islamabad's G-6 sector, said she had been shopping at Utility Stores for years, as their quality goods and subsidized rates had always helped stretch her household budget. 'Sugar at the store costs Rs164 per kilogram [$0.58], while in the open market it is around Rs200 [$0.71]. Similarly, price differences exist for other essential items as well,' she said, adding that closure of these stores would deeply affect the public, especially low-income families.
Arab News
6 hours ago
- Arab News
Qatar, Kuwait, UAE see steady June PMI growth; Lebanon slows decline
RIYADH: Business activity across Middle Eastern economies showed mixed trends in June, with Qatar leading growth, Kuwait and the UAE holding steady, and Lebanon remaining in contraction despite easing declines, market trackers showed. According to the latest Purchasing Managers' Index data from S&P Global, Kuwait's PMI fell to 53.1 in June from 53.9 in May — a three-month low but still well above the neutral 50 mark, signaling a solid improvement in business conditions in the country's non-oil private sector. In the UAE, the PMI ticked up to 53.5 in June from 53.3 in May, while Qatar's figure for the non-energy private sector rose to 52 in June from 50.8 in May, Lebanon's PMI edged up to 49.2 in June from 48.9, remaining below the 50 threshold for a fourth consecutive month. The broadly positive figures are in line with World Bank forecasts that Gulf Cooperation Council economic growth will accelerate to 3.2 percent in 2025 and 4.5 percent in 2026, driven by the easing of OPEC+ oil cuts and strong non-oil sector expansion. Kuwait growing despite slowdown Kuwait's PMI rating, which still shows growth despite a deceleration, comes amid expectations of an economic rebound, with the International Monetary Fund and World Bank projecting Kuwait's real gross domestic product growth at 1.9 percent and 3.3 percent, respectively, for 2025. Andrew Harker, economics director at S&P Global Market Intelligence, said: 'Sustained rises in workloads and increasing confidence for the year ahead have been good news for the Kuwaiti labor market, with companies looking to take on additional staff to keep on top of orders. That said, he noted that even a record increase in employment in June failed to prevent a further buildup of outstanding business, suggesting the need for additional capacity improvements in the months ahead. 'All in all, the first half of 2025 has been a successful one for Kuwait's non-oil private sector, and firms go into the second half of the year in good shape to continue expanding,' Harker added. UAE PMI edges higher Despite the UAE's PMI figure inching up in June to 53.5 from 53.3 in the previous month, new business growth in the country slowed due to geopolitical tensions, faster output and stable inventories kept overall activity in expansion territory, according to newly released data from S&P Global. The rise was attributed to firms ramping up efforts to clear backlogs, which boosted output growth and stabilized stock levels after May's record decline. Non-oil private sector firms in the country experienced softer demand toward the end of the second quarter, as heightened regional tensions led to more cautious client spending. Geopolitical uncertainty also disrupted supply chains, though input cost pressures eased. 'The UAE non-oil sector showed signs of a minor setback in June due to the conflict between Israel and Iran. The impact was primarily felt on the demand side, as some businesses reported a slowdown in orders driven by heightened tensions,' said David Owen, senior economist at S&P Global Market Intelligence. He explained that this led to a further slowdown in overall new business growth, which fell to its lowest level in almost four years. 'However, with firms instead able to turn their attention to addressing the substantial level of outstanding work — evidenced since early 2024 — the impact on overall business conditions was negligible,' Owen said. The senior economist noted that input costs rose at their slowest pace in nearly two years, allowing businesses to offer price reductions to customers. With consumer inflation remaining subdued, the data suggests a recovery in sales growth is likely in the near future — provided regional tensions ease, he explained. Qatar extends expansion Qatar's PMI rise of 1.2 points marked the strongest growth since March and the 18th consecutive month of expansion. The uptick was driven by higher output and employment, though declines in new orders, input stocks, and faster supplier delivery times slightly offset the overall improvement. The reading of 52 remained just below the long-term average of 52.2. The latest data signaled a stronger overall improvement in business conditions in Qatar's non-energy sector at the halfway point of 2025, supported by a sharp rise in employment and renewed growth in activity. Employment rose at one of the fastest rates since the survey began eight years ago, partly reflecting efforts to manage a quicker buildup of backlogged work. Output expanded despite a slight decline in new business. 'Growth remained modest overall, however, as the PMI has not beaten its long-run average of 52.2 so far this year. This can mainly be attributed to intermittent and muted growth of output and new orders, with the non-energy sector not registering concurrent growth in these two indicators since December 2024,' said Trevor Balchin, economics director at S&P Global Market Intelligence. 'The overall strength of the headline PMI figure continues to be underpinned by rising employment, with companies seemingly undeterred by a lack of sustained demand growth. Ongoing hiring was corroborated by another rise in outstanding business in June, and at the fastest rate since last October,' he added. Balchin also noted that wage growth accelerated in June, approaching the record set in January. However, overall inflation remained moderate, as purchase price inflation eased to its lowest level in nearly a year, allowing companies to once again reduce the prices of their goods and services. Lebanon contracts Lebanon's PMI signaled a slower pace of decline in private sector conditions as employment and inventory levels stabilized. S&P data showed that Lebanon's private sector remained in contraction at the end of the second quarter, though the pace of decline eased compared to May. Output fell more moderately despite weaker sales, while employment and inventory levels held steady. However, heightened regional tensions weighed on business confidence and pushed up purchasing costs. 'The escalation of the war between Iran and Israel resulted in weaker customer sales and client cancelations, leading to a drop in business activity,' said Fadi Osseiran, general manager of BLOMInvest BANK. He noted that purchase prices incurred by companies had surged at the fastest pace in eight months, with these increases being passed on to clients. 'What is unfortunate is the sharp drop in the Future Output Index, revealing pessimism at private sector companies regarding future outlook, as 53 percent of respondents expect activity levels to diminish in the upcoming 12 months,' Osseiran said.
