Current account registered a deficit of $156 million in March against a surplus of $167 million in the previous month. Had the CSF money not flown in February, CAD would have matched to Marchs. The overall nine month (Jul-Mar) deficit stood at $2.2 billion (1.2% of GDP) as compared to $1.3 billion (0.71% of GDP) in the corresponding period last year.
Although, the gap has widened to what it was in the last year, for full year it may be contained within the SBPs forecasts (<$3.5bn), flirting with the governments target ($2.9 bn) and probably miss the Funds stiff estimates ($2.3bn).
Exports grew by a mere 3 percent in March as well as in nine months, on the flip, imports soared by 7 percent in the last month to supersede the year to date growth of 4 percent. This explains the widening of trade deficit by 14 percent in March. Its too early to establish a trend out of this anomaly, but sharp rupee appreciation in March ought to have its impact on making imports more affordable and exports less competitive. One has to wait for April numbers to assert any meaningful impact
Home remittances are apparently resilient to currency movement as its momentum remained unabated - growing by 12 percent on monthly and 10 percent on yearly basis. Rupee appreciation can have a mixed impact - more dollars are needed to be remitted for having same amount in rupee terms and on the flipside, there is less incentive to send money back home as its value becomes cheaper. But, the good news is that in March remittances were at a quarterly peak of $1.33 billion.
The current account story did not narrate the goodies of balance of payment. The positive change in the equation has emanated from the capital account, as for the second consecutive month it has shown a surplus of over $750 million - thanks to, yes you know it - the Saudi flow.
The financial account continued its dismal performance as direct investment and portfolio investment remained elusive. Whatever little investment came, almost the same amount was repatriated. The fourth quarter is critical as with rupee appreciation which is deemed to be not sustainable; it makes sense for MNCs to remit more profits and dividends out before currency stars adjusting to its real value.
But the equation of the month is simple - money coming in surpassed the money going out - the SBP reserves are up by $1,430 million in March. Should the momentum continue in April - the position on financial accounts would be rosier on account of $2 billion raised by the government in Euro bond. More money is committed and promised to come in the fourth quarter. Forex reserves have crossed $11.5 billion after getting Euro bonds proceeds and lets see where the fiscal year ends!
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