Dollar Scarcity Persists Despite Current Account Surplus

Despite a current account surplus and timely processing of import L/Cs and profit/dividend repatriation, many bank treasury divisions perceive a dollar shortage in the market.

This feeling is supported by persistent payment challenges since December, even with a $1.2 billion current account surplus over the past four months (Nov 2024–March 2025). Simultaneously, the central bank’s (SBP) foreign exchange reserves declined by $1.4 billion, indicating absorption of surplus dollars in the interbank market.

The SBP has a high demand for liquidity, acquiring nearly all available surplus dollars from banks to cover interest on external debt (part of the current account) and repay maturing loans, which is evident in a $2.5 billion decrease in the financial account over the same period (Dec 2024–March 2025).

The SBP is facilitating the government’s commitments by obtaining dollars from the market, rather than being directly responsible for these loans or their rollovers. The Ministry of Finance is responsible, having not secured timely inflows, thereby straining the market.

This issue has continued into April. Remittances, which have been strong, are projected to fall by 15–20 percent compared to last month due to seasonal trends. This, along with delays in IMF Board approval, is worsening the dollar scarcity.

The Finance Minister has sought a rollover of a matured loan from China’s Exim Bank and an extension of the currency swap arrangement. Chinese rollovers are essential for obtaining IMF Board approval, but the outcome is still pending.

Exporters have decreased forward dollar bookings due to global trade uncertainties and potential effects on the PKR from proposed tariffs. Similarly, some importers are accelerating payments, heightening anxiety among treasurers.

Sentiment is gradually declining. Banks are aggressively seeking remittances to fulfill payment duties, alleging limited access to dollars from other banks via the SBP. The central bank promptly absorbs any daily surplus dollars. Banks are providing discounts, even at a loss, to attract remittances. While this aids formal flows, it negatively impacts bank profitability.

Despite market pressures, the PKR is not depreciating considerably against the USD, following a consistent minor daily depreciation. However, the PKR is declining against many trading partners’ currencies due to a falling dollar index, which is advantageous for exporters.

However, this is not generating new dollar inflows. The SBP Governor anticipates about $3.5 billion in inflows by June, projecting fiscal year-end reserves above $14 billion. He consistently assures that rollovers are simply taking time during post-monetary policy briefings.

Sources in Washington D.C. indicate that IMF Board approval is anticipated within two weeks, coinciding with potential confirmation of new loans or rollovers from China. This would aid in replenishing SBP reserves, improving the financial account, and easing the dollar scarcity.