ISLAMABAD: Pakistan’s foreign exchange reserves have reached their highest level since March 2022, marking a significant improvement in the South Asian country’s external position without a corresponding build-up in public debt, a senior government advisor stated on Sunday.
Khurram Schehzad, Advisor to Pakistan’s Finance Minister, said in a post on X that the rise in reserves reflected Pakistan’s policy discipline and reform continuity, breaking from past economic stabilisation efforts that relied heavily on external borrowing.
According to Schehzad, Pakistan’s total foreign exchange reserves now stand at $21.1 billion. Of this, $15.9 billion is held by the State Bank of Pakistan (SBP), its highest level since 4 March 2022, while $5.2 billion is held by commercial banks.
He said the country’s import cover had improved to more than 2.60 months, up from 2.38 months earlier. Import cover had fallen to less than two weeks in February 2023 before recovering steadily, reaching 2.6 months by December 2025, the advisor stated.
Schehzad said the improvement in import cover pointed to greater resilience in trade and external payments.
‘Structurally stronger’
Schehzad said the current reserve build-up differed from earlier episodes because it was achieved without significant new external borrowing.
🇵🇰 Pakistan’s Forex Reserves Highest Since March 2022
Quality Over Quantity: Forex Reserves Rise, Import Cover Improves – Without Debt Buildup/Decline in Foreign Debt-GDP in 2022-2025 vs 2015-2022.
Pakistan’s foreign exchange reserves have reached their highest level since… pic.twitter.com/IuMm1QkLcc
— Khurram Schehzad (@kschehzad) December 21, 2025
Between June 2015 and June 2022, he said, Pakistan’s external public sector debt rose from $55 billion to $100 billion, an average increase of $6.4 billion per year, while SBP reserves declined.
In contrast, since June 2022, public sector external debt has remained broadly unchanged in absolute terms. Over the same period, the external debt-to-GDP ratio fell from 31% to 26% by June 2025, he said.
Foreign exchange reserves rose from $2.9 billion to about $15.9 billion, nearly a 5.5-fold increase. SBP Forward liabilities were reduced from $5.7 billion in February 2023 to below $2 billion, according to the advisor.
“This time, reserves have risen while debt has stabilised,” Schehzad said, adding that this had improved both the size and quality of Pakistan’s external buffers.
Implications for markets and economy
Schehzad said the stronger reserve position reduced sovereign external risk and improved the durability of macroeconomic stability, supporting a better medium-term outlook for credit ratings.
For businesses, he said improved foreign exchange liquidity would reduce uncertainty around imports, payments and letters of credit, creating a more stable environment for pricing and investment.
For the wider economy, Schehzad said stronger buffers lowered the risk of external shocks feeding into inflation and improved the country’s ability to manage volatility without disruption.
Shift away from debt-led stabilisation
Schehzad said Pakistan had rebuilt reserves without piling up debt, restored import cover from weeks to months and materially reduced forward foreign exchange risks.
“This is not just a numerical recovery,” he said. “It is a structural improvement in economic strength and confidence.”
He described the trend as a decisive shift away from debt-led stabilisation towards a more sustainable external position built on reforms and fiscal discipline.
IMF acknowledges significant progress
Last week, the International Monetary Fund’s (IMF) Executive Board approved the disbursement of $1.2 billion for Pakistan – $1 billion under the Extended Fund Facility (EFF) and $200 million through the Resilience and Sustainability Facility (RSF).
“Pakistan’s policy efforts under the EFF have delivered significant progress in stabilising the economy and rebuilding confidence amid a challenging global environment and recent severe floods. Fiscal performance has been strong, with a primary surplus of 1.3% of GDP achieved in FY25, in line with targets,” the IMF said in a statement.
“Inflation has increased, reflecting the impact of the floods on food prices, but this is expected to be temporary. Gross reserves stood at $14.5 billion at the end of FY25, up from $9.4 billion a year earlier, and are projected to continue to be rebuilt in FY26 and over the medium term,” the Fund stated.
