SBP’s $9 Billion Market Intervention in 2024 Stabilizes Reserves Amid Debt Challenges

The State Bank of Pakistan (SBP) purchased over $9 billion from the local market in 2024 to stabilize foreign exchange reserves, marking a record intervention. This disclosure was made by Governor Jameel Ahmad during a Senate Standing Committee on Finance meeting, according to The Express Tribune.

Of the total amount, $4.5 billion was acquired in the year’s second half, helping maintain reserves at $11.7 billion despite $5.7 billion in debt repayments during the first half of the fiscal year.

Governor Ahmad emphasized that market-based acquisitions have enhanced the “quality” of reserves, reducing reliance on external borrowing. Without these interventions, reserves could have dropped below $3 billion, posing risks of economic instability and inflationary pressures.

He also confirmed that Pakistan has requested the UAE to roll over $2 billion in maturing cash deposit debt. This commitment aligns with the $7 billion IMF Extended Fund Facility.

Additionally, bilateral and commercial creditors are expected to roll over $16 billion in debt, including $2 billion from the UAE, to manage external repayment pressures. The SBP aims to balance reserves with $4.6 billion in repayments due in the second half of FY25.

Senate Standing Committee Chairman Saleem Mandviwalla voiced concerns about $277 million paid to Visa and MasterCard for local transactions, urging the SBP to limit such outflows. He suggested introducing separate cards for domestic and international transactions to reduce dependence on foreign platforms.

The committee also scrutinized the Pakistan Remittance Initiative (PRI), revealing that 80% of the Rs86 billion budget is used for overseas incentives.

Opposition Senator Shibli Faraz questioned the sustainability of SBP’s interventions, warning they might hinder long-term reforms. The SBP governor defended the measures, highlighting their role in stabilizing reserves and maintaining economic stability.

Meanwhile, Pakistan’s total external debt reached $133 billion by December 2024, with external public debt at $101 billion