Pakistan’s foreign exchange reserves are at roughly $15.25 billion, which includes net reserves in both the State Bank of Pakistan (SBP) and other banks, as of the week ending 25 April, 2025, according to data published by the SBP, Pakistan’s central bank.
Islamabad has been facing economic headwinds over the past few years. In July 2023, the country through a stand-by arrangement (SBA) with the International Monetary Fund (IMF), which lasted till April 2024.
In September 2024, Pakistan struck a $7 billion deal with the IMF for an extended fund facility (EFF) loan for 3 years till October 2027. The country, which has been a part of numerous IMF funding programmes, faced catastrophic floods in 2022, followed by record high inflation which crossed 35 percent in 2023.
The IMF deals have helped the cash-strapped country, which saw its foreign exchange reserves drop to $9.1 billion in the 2022-2023 financial year. From its latest deal, Islamabad received $1 billion the moment the deal became operational at the end of 2024, for the review of the $7 billion programme, which would give it access to a further $1 billion.
In its March statement, the IMF also announced a new loan of roughly $1.3 billion to Islamabad through the resilience and sustainability facility subject to approval by the IMF Executive Board. Islamabad’s financial consolidation efforts saw its credit rating upgraded by the credit rating agency Fitch Ratings to B- from CCC+ on the back of its narrowing fiscal deficits, downward debt trajectory, recovery of foreign exchange reserves and lower inflation.
The ratings upgrade came a week before the terrorist attack in Jammu and Kashmir’s Pahalgam, which left 26 people dead, including 25 Indians and one foreign national. India has said that the attack on tourists on 22 April has cross-border linkages and announced a raft of punitive measures against Pakistan starting 23 April. Most recently, India suspended the exchange of all categories of parcels with Pakistan, as well as banning imports of all goods originating in Pakistan.
In its first set of measures announced on 23 April, India held the Indus Waters Treaty 1960 in abeyance, apart from reducing the strength of Islamabad’s mission to New Delhi from 55 to 30, and expelled the three Pakistani defence advisers from the country, while annulling the positions.
Islamabad responded on 24 April, announcing that it “shall exercise” its right to hold all bilateral agreements in abeyance including the Simla Agreement signed in 1972.
According to Moody’s Ratings’ latest sectoral note, the economic impact of the sustained escalation of tensions with India will be minimal due to the paucity of its trade with Pakistan.
“Comparatively, the macroeconomic conditions in India would be stable, bolstered by moderating but still high levels of growth amid strong public investment and healthy private consumption. In a scenario of sustained escalation in localised tensions, we do not expect major disruptions to India’s economic activity because it has minimal economic relations with Pakistan,” said the note.
(Edited by Zinnia Ray Chaudhuri)
