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Foreign reserves are capital deposits controlled by central banks or monetary authorities with the intention of accumulating a set of reserve currencies. Since international reserves are used to measure a country’s capacity to meet its foreign currency obligations, they function as an economic indicator.

Liquid Foreign Exchange Reserves In 2023 (Million US$)
End Period Net Reserves with SBP Net Reserves with Banks Total Liquid FX Reserves
(Month end )
January 3,086.2 5,655.5 8,741.7
February 3,814.1 5,453.8 9,267.9
March 4,208.0 4,955.6 9,163.6
April 4,458.3 4,998.6 9,456.9
May 4,090.7 5,422.3 9,513.0
June 4,445.1 4,714.9 9,160.0
July 8,153.8 5,309.9 13,463.7
August 7,849.3 5,321.8 13,171.1
September 7,615.5 4,854.3 12,469.8
October 7,507.8 5,068.8 12,576.6
November 7,257.0 5,135.8 12,392.8
1-December 7,020.2 5,086.9 12,107.1
8-December 7,040.8 5,165.6 12,206.4

On the other hand, foreign reserves are stocks held against future uncertainty of the balance of payments. Most commonly, foreign reserves are defined as official public sector assets controlled by monetary authorities to directly finance payment imbalances and regulate the magnitude of these imbalances by affecting the exchange rate and/or for other related purposes.

As per the report, China had the highest forex reserves in Q2 2023, at $3.1 trillion. Japan and Switzerland ranked 2nd and 3rd with $1.1 trillion and $809 billion, respectively. In Q3 2023, India recorded a marginal decrease of $9 billion in forex reserves as per RBI data.

In various developing countries, the present accumulation of foreign exchange reserves has reached record-breaking levels. A rise in foreign exchange reserves raises both liquid and total debt while shortening debt maturity. It also leads to a fall in consumption, although investment and economic growth may be enhanced when the tradable sector is capital-intensive. Financial globalization during the last decade has been accompanied by frequent and painful financial crises. During these crises, countries with smaller liquid foreign assets had difficulty averting panic in financial markets and preventing sudden reversals in capital flows. Various developing countries thus came to recognize grew liquidity as a significant form of self-protection against crises. Raising foreign exchange reserves was a popular strategy adopted by many developing countries. However, the accumulation of foreign exchange reserves is accompanied by considerable social costs. It is therefore important to reconsider the optimal level of foreign exchange reserve accumulation in developing countries. In the list of developing countries, Pakistan’s liquid foreign exchange reserves rose by $100 million during the last week.
According to the State Bank of Pakistan (SBP) weekly latest report, the total liquid foreign exchange reserves held by the country stood at $ 12.206 billion as of December 8, 2023, as against $12.107 billion on December 1, 2023. SBP’s reserves during the week under review grew by $21 million to $7.041 billion up from $7.02 billion a week earlier. Net foreign exchange reserves held by commercial banks also surged by $79 million to $5.166 billion at the end of last week. Pakistan’s foreign exchange reserves are expected to rise in the coming months as Pakistan and IMF reached a staff-level agreement on November 15 after the first review under Pakistan’s Stand By Agreement (SBA).

However, it is subject to approval by the IMF’s Executive Board. Upon approval, Pakistan will get inflows amounting to $700 million. The IMF’s SBA $ 3 billion is to be concluded in the second week of April 2024 and so far $1.2 billion has been released in July this year, while the remaining disbursement under the program is about $1.8 billion.