Qudsia Bano

In a significant development for Pakistan’s foreign exchange market, banks purchased $425 million from exchange companies in June FY24, showcasing a strong inflow of foreign currency. This substantial transaction indicates higher remittances than the previous year, reflecting a growing confidence in the country's economic stability, reports WealthPK. The State Bank of Pakistan’s reserves have also improved, reaching $9.4 billion due to inflows from the donor agencies and positive outcomes from the ongoing talks with the International Monetary Fund (IMF). Zafar Paracha, General Secretary of the Exchange Companies Association of Pakistan, confirmed this robust activity. “Our data shows that we sold $425 million to banks in June, which is highly encouraging.

This indicates that the inflows were much higher than the last year, signaling a positive trend for the foreign exchange market,” he said. Throughout FY24, inflows through the banks and exchange companies remained high, despite a challenging economic landscape. The government received $27 billion in remittances in the first 11 months of FY24, compared to $25.1 billion in FY23. While this represents a significant increase, the inflows are still lower than $28.5 billion received in FY22. Economic analysts see these significant purchases as a reflection of market confidence and a positive sign for the country’s financial health. Dr. Imran Malik, senior economist at the Pakistan Business Council, said, “Substantial purchase of foreign currency by banks from exchange companies demonstrates confidence in the economy and provides necessary liquidity for foreign transactions.

This is crucial for maintaining exchange rate stability, which has remained stable for more than four months. “While these inflows are beneficial in the short term, over-reliance on remittances and foreign currency inflows can pose risks. Diversifying the economic base by boosting domestic production and exports is crucial. The government needs to implement policies that encourage sustainable economic growth beyond remittances to ensure long-term stability”. The positive outlook for the foreign exchange market has also attracted foreign investment, with the Pakistan Stock Exchange (PSX) attracting a net foreign investment of $140 million, marking a significant milestone after a decade.

Credit: INP-WealthPk