Experts concern over rise in Pakistan's import bill, as C/A surplus streak ends

As the streak of maintaining the Current Account surplus ended in December, experts have raised concern over the rise in the import bill.

Pakistan’s current account posted a $ 662 million deficit in December 2020 after surpluses for five consecutive months. The primary reason behind the deficit in December 2020 is a massive rise in imports.

“We expect the impact of recent increase in international oil prices to be visible in coming months,” expressed Topline Securities in its latest report.

It said that they have tweaked Pakistan external account estimates and now expect home remittances to rise at $27.5 billion in FY21 as compared to previous estimates of $25.9 billion. “However we also increase our trade deficit estimate to be $25.2 billion from $23.8 billion.”

The report was of the view that that the imports of goods are likely to increase higher then earlier expected as economic activity picks including rise in import of auto CKD/CBU, coal for cement, while pressure on account of import of machinery through TERF is also anticipated.

The forecast come amid State Bank of Pakistan’s (SBP’s) statistics revealed that the country posted a current account deficit of $662 million in December 2020 as against a surplus of $513 million in November 2020. The current account deficit in December 2020 is the highest deficit after the June 2019 deficit of $ 981 million.

In addition, the deficit in December 2020 is also some 130 percent higher than December 2019, in which the deficit was $287 million.

Cumulatively, the current account remained in surplus during the first half of the current fiscal year (FY21). Current account recorded $1.131 billion surplus in July-December of FY21 compared with a deficit of $2.032 billion in the same period of last fiscal year (FY20).