- Inflation declined, current account surplus, fiscal deficit narrowed, primary balance strengthened, stock exchange bullish
As per the government of Pakistan officials, Pakistan’s economy in FY2025 has been widely recognized as a notable macroeconomic success among emerging markets. It has demonstrated overall stabilization and is rebuilding confidence, amidst a challenging global environment and regional geopolitical risks. Improvements have been observed across all major macroeconomic indicators: inflation has declined from double digits to a single digit, the current account deficit has shifted to a surplus, the fiscal deficit has narrowed, the primary balance has further strengthened, and the Pakistan Stock Exchange maintains a bullish trend. This improvement in key macroeconomic indicators has fostered overall stability, positioning the economy to enter the take-off stage in the medium term. On the account of these developments, the real GDP growth is recorded at 2.68 percent in FY 2025.
According to data released by the State Bank of Pakistan (SBP) presently, the central bank’s foreign currency reserves raised $21 million to $14.357 billion in the week ended September 12, 2025. With this uptick, the country’s total liquid foreign reserves reached at $19.736 billion. Out of this, commercial banks held $5.378 billion in net reserves. Although the SBP’s reserves are significantly higher than last year’s $9.56 billion by this time, much of this build-up reflects IMF inflows and bilateral rollovers rather than self-sustained improvements by investment or exports. The reserve numbers look better, but the underlying flows show continuing fragility. Any delay in IMF reviews or bilateral support could quickly unravel stability.
Different sources recorded that the Real Effective Exchange Rate (REER) reached at 100.1 in August 2025, as against to 100.01 in July 2025, reflecting a marginal month-on-month (MoM) raise of 0.09 percent. On a fiscal year-to-date basis (FYTD), the REER has appreciated by 2.11 percent, while on a calendar year-to-date basis (CYTD), it remains down by 3.44 percent. Furthermore, the Pakistani rupee extended its upward streak against the US dollar presently, appreciating 0.01 percent in the inter-bank market.
The rupee has depreciated 1.04 percent CYTD and appreciated 0.82 percent FYTD. International experts analyzed that the global foreign exchange reserves totaled approximately $12.54 trillion in Q1 2025, a rise from $12.36 trillion in late 2024. China, Japan, and Switzerland hold the highest reserves among individual countries, with China’s reserves approaching $3.5 trillion. The International Monetary Fund (IMF) compiles these figures, noting that the overall increase in reserves in early 2025 was because of the appreciation of other currencies against the U.S. dollar.
Foreign currency reserve
Foreign currency or exchange reserves, otherwise known as forex reserves have few main reasons why central banks have foreign currency reserves:
- To help keep the value of a local currency at a fixed rate. China pegs the value of the yuan to the US dollar. By stockpiling dollars it raises the dollar value versus the yuan thereby increasing sales by making Chinese exports cheaper than American-made goods.
- To keep a local currency lower than the dollar. Japan, which has a floating exchange rate system, buys US treasuries or bonds, to keep the yen lower than the dollar. This again helps keep its exports relatively cheaper.
- To sustain liquidity in case of an economic crisis. A central bank can step in and exchange its foreign currency for the local currency ensuring companies can continue to import and export competitively.
- To meet a country’s foreign finance obligations. These could include paying debts, financing imports and absorbing sudden capital movements.
- To finance internal projects. Infrastructure or industry programs are sometimes financed this way.
- To reassure foreign financiers. Wars or internal unrest can spook investors who may look to move their money out of the country. Holding forex reserves can project an air of confidence and calm investors’ fears.
- To diversify their portfolio. By holding different currencies and assets in reserve, a central bank can diversify its risk and provide protection should one investment decline.
| Pakistan: Liquid Foreign Exchange Reserves (Million US$) | |||
|---|---|---|---|
| End Period* | Net Reserves With SBP | Net Reserves With Banks | Total Liquid FX Reserves |
| 2-May-2025 | 10,332.5 | 5,150.1 | 15,482.6 |
| 9-May-2025 | 10,403.1 | 5,210.7 | 15,613.8 |
| 16-May-2025 | 11,446.5 | 5,202.0 | 16,648.5 |
| 23-May-2025 | 11,516.0 | 5,120.7 | 16,636.7 |
| 30-May-2025 | 11,516.9 | 4,559.6 | 16,076.5 |
| 6-Jun-2025 | 11,675.6 | 5,199.4 | 16,875.0 |
| 13-Jun-2025 | 11,721.9 | 5,282.6 | 17,004.5 |
| 20-Jun-2025 | 9,064.5 | 5,332.9 | 14,397.4 |
| 27-Jun-2025 | 12,727.8 | 5,363.3 | 18,091.1 |
| 4-Jul-2025 | 14,502.2 | 5,526.5 | 20,028.7 |
| 11-Jul-2025 | 14,525.6 | 5,431.5 | 19,957.1 |
| 18-Jul-2025 | 14,456.6 | 5,460.9 | 19,917.5 |
| 25-Jul-2025 | 14,303.9 | 5,303.1 | 19,607.0 |
| 1-Aug-2025 | 14,231.9 | 5,263.7 | 19,495.6 |
| 8-Aug-2025 | 14,243.2 | 5,253.5 | 19,496.7 |
| 15-Aug-2025 | 14,256.2 | 5,314.6 | 19,570.8 |
| 22-Aug-2025 | 14,274.3 | 5,343.5 | 19,617.8 |
| 29-Aug-2025 | 14,302.5 | 5,357.0 | 19,659.5 |
| 5-Sep-2025 | 14,336.3 | 5,344.6 | 19,680.9 |
| 12-Sep-2025 | 14,357.2 | 5,378.5 | 19,735.7 |
| * Week-End Levels | |||