SBP Admits $8B Purchases Weaken Rupee

Islamabad, August 27, 2025, 10:28 PM PKT — State Bank of Pakistan’s (SBP) Acting Deputy Governor Dr. Inayat Hussain has admitted before the National Assembly Standing Committee on Finance, chaired by Syed Naveed Qamar, that nearly $8 billion in US dollar purchases from the market have kept the rupee weaker at around Rs282, a “fair” rate, per The Express Tribune, warning that a stronger rupee could spike imports and strain the external sector. During July-May FY2024-25, SBP bought $7.8 billion, improving foreign exchange reserve composition previously reliant on foreign loans, with purchases made only during market surplus.

Critics accuse SBP and IMF of artificially managing the rupee, clashing with free-market principles, as Deputy Prime Minister Ishaq Dar pushes for Rs260, while MNA Muhammad Jawed Hanif argues Rs250–260 is fair, linking Rs282 to inflation. Dr. Hussain insists the rupee is neither undervalued nor overvalued, with future rates tied to foreign exchange availability and import demand. SBP Executive Director Amin Lodhi targets reserves of $15.5 billion by December and $17.5 billion by June, short of the $20 billion safety level (three months’ import cover), to absorb export shocks, with a current account deficit capped at 1% of GDP and $40 billion in remittances projected. Inflation may exceed 7% temporarily due to base effects and floods, stabilizing at 5–7%, with gas price hikes (July and February) factored in, while growth may hit 3.25%, below the 4.2% target, with 11% interest rates key to the 7% inflation goal. Web context on currency policy shows past controversies, while posts found on X reflect skepticism—some question management, others demand transparency. Critically, the narrative of “reserve building” may mask market manipulation—web data hints at past interventions, and X sentiment suggests distrust in policy intent, pointing to potential risks.