Pakistan’s forex reserves suddenly rise by $3 billion:Hit record $26 billion; India’s reserves climb to around $717 bn in Aug

Pakistan’s foreign exchange reserves rose by more than $3 billion in one week. As of 11 September, the State Bank of Pakistan’s foreign exchange reserves had reached a record $21.39 billion, the highest level in the bank’s history. Including the reserves held by the State Bank and other banks, Pakistan’s total foreign exchange reserves stood at $26.79 billion. This was the highest level since September 2021. However, the main reason for this sudden increase was foreign borrowing of around $3 billion. In other words, a large share of the dollars added to Pakistan’s reserves came from borrowing, not from new earnings. India’s foreign exchange reserves rose by $9.9 billion to $716.9 billion during the week ended August 14, according to the Reserve Bank of India. Foreign exchange reserves rose by $3 billion in one week through Eurobonds In the week ending 11 September, its foreign exchange reserves increased by $3.061 billion. The main reason was the nearly $3 billion Pakistan received through Eurobonds. A Eurobond is a type of bond issued to borrow money from foreign markets. The government raises money from investors who buy it and later repays it with interest. Pakistan raised money by issuing this bond in the international market, and the amount was added to its foreign exchange reserves. Therefore, an increase in reserves does not mean that Pakistan earned $3 billion in one week. The money was received as a loan, which Pakistan will have to repay. How many dollars does Pakistan have now? As of 11 September, Pakistan had: Total reserves stood at $23.72 billion a week earlier. This means they increased by around $3.08 billion in just seven days. Total reserves are still slightly below the level of around $27.1 billion recorded in September 2021. However, the $21.39 billion held by the State Bank alone is its highest-ever reserve. How does Pakistan benefit from rising reserves? Rising foreign exchange reserves mean that Pakistan now has a larger dollar buffer. It can use these dollars to buy oil, machinery, raw materials and other essential items. Dollars are also needed to repay instalments and interest on foreign debt. Pakistan’s total reserves of $26.79 billion are equivalent to around three months of import expenditure. This means the current reserves are equivalent to the average import bill for around three months. It does not mean that Pakistan can manage for three months without earning any new dollars. Workers abroad are also sending in dollars Remittances-the money sent by people working abroad for Pakistan-are also a major source of foreign exchange. Pakistan received around $3.66 billion in remittances in August, compared with around $3.63 billion in July. During the same period, Pakistan’s deficit in transactions with the rest of the world was only $98 million. The deficit was $445 million in July. This means the situation improved in August compared with July, but the deficit still remains. Pakistan is still spending more dollars on imports In August, Pakistan imported goods and services worth around $6.64 billion, while its exports were worth around $3.33 billion. In other words, Pakistan is not earning as many dollars from selling goods and services abroad as it is spending on purchases from other countries. Pakistan’s total deficit in July-August 2026 was around $543 million. It was $853 million during the same period of the previous financial year. This shows that the external account position has improved, but Pakistan’s foreign exchange needs remain quite high. PM Sharif says: This is a sign of economic recovery Prime Minister Shehbaz Sharif said that foreign exchange reserves reaching a record level was the result of the economic team’s hard work. According to him, an increase in remittances, improved exports, a better position on the deficit in foreign transactions and control over government spending helped boost the reserves. The Prime Minister’s Office said Pakistan’s return to the international market had also strengthened the confidence of other countries and investors. Maintaining the reserves is now the biggest challenge For Pakistan, merely increasing its foreign exchange reserves will no longer be enough. It will also have to maintain them in the coming months. Three things will be crucial for this: Pakistan’s import bill could rise, particularly if oil prices increase. This would put further pressure on its foreign exchange reserves. Pressure from debt repayments will also continue Despite its record reserves, Pakistan has to repay old debts. It has several payments due to the International Monetary Fund (IMF) between September and December. Pakistan is also trying to secure financial assistance and foreign exchange from other countries. According to Reuters, Pakistan is considering extending its 30 billion yuan currency swap arrangement with China in 2027. A currency swap is an arrangement between two countries under which they make each other’s currencies available on agreed terms, ensuring that there is no shortage of foreign currency when needed. Meanwhile, talks are also under way over Pakistan’s $10 billion Exchange Stabilisation facility with the United States. This is a financial facility provided to help stabilise the economy when there is a shortage of foreign currency or pressure in the market. In addition, Pakistan’s $7 billion IMF programme is continuing.