The current account is in surplus, with no delays in import L/Cs and profit/dividend repatriation payments. Yet, the general feeling across most bank treasury houses is that dollars are short in the market.
This sentiment is not unfounded. Payment pressures have persisted since December, even though the current account posted a surplus of $1.2 billion over the last four months (Nov 2024–March 2025). However, during the same period, SBP’s forex reserves fell by $1.4 billion. Someone is absorbing every surplus dollar in the interbank market.
The SBP is liquidity-hungry and is virtually buying every available surplus dollar from banks’ treasuries—not only to meet interest payments on external debt (part of the current account) but also to repay maturing loans (reflecting a sharp fall in the financial account). The financial account has dropped by a staggering $2.5 billion over the past four months (Dec 2024–March 2025).
It’s not the SBP that is primarily liable for these loans or their (lack of) rollovers. The central bank is merely trying to meet the government’s obligations by sweeping dollars from the market. The responsibility lies with the finance ministry, which has failed to generate timely inflows, thereby building pressure in the market.
The situation has continued into April. Remittances—the star performer—are expected to decline by 15–20 percent compared to last month’s flows, due to seasonal factors. This, coupled with delays in the IMF Board’s approval, is contributing to the dollar shortage in the market.
The finance minister has requested a rollover of the matured loan from China’s Exim Bank, along with an extension of the currency swap facility. Chinese rollovers are crucial for securing the IMF Board’s approval. The wait continues.
Meanwhile, exporters have reduced forward bookings of dollars due to uncertainty in international trade and potential impacts on the PKR stemming from Trump’s proposed tariffs. Some importers are expediting payments for similar reasons, adding to the anxiety among treasurers.
Sentiment is gradually worsening. Banks are fiercely competing for remittances to meet their payment obligations, as some claim that SBP seldom allows them to freely buy dollars from other banks. The central bank swiftly absorbs any surplus dollars available on any given day. To attract remittances, banks are offering discounts and, in some cases, incurring losses. While this boosts formal flows—a positive development—it comes at the cost of banks’ profitability.
Despite all the tightness in the market, the PKR is not depreciating significantly against the USD. The usual "formula" of a 10-paisa daily depreciation continues. However, due to a falling dollar index, the PKR is depreciating against most trading partners' currencies, which benefits exporters.
Yet, this trend is not translating into fresh dollar inflows. The SBP Governor expects around $3.5 billion in inflows by June, projecting the fiscal year to close with reserves above $14 billion. In every post-monetary policy analyst briefing, he reassures that the rollovers simply take time.
News from Washington D.C. suggests that IMF Board approval is expected within two weeks, by which time some confirmation of either new loans or rollovers from China should materialize. This would help rebuild SBP’s reserves, bring some greenery back to the financial account, and ease the dollar shortage in the market.
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