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KARACHI: The country’s current account balance remained surplus for the second consecutive month in August 2020 supported by impressive growth in workers’ remittances and lower import bill.

According to State Bank of Pakistan (SBP), current account balance was surplus amounting to $297 million in August 2020 compared to $601 million deficit in the same period of last fiscal year (FY20).

This is the second consecutive month of this fiscal year, in which the current account swung into a surplus. Previously, in July 2020 current account posted $508 million surplus. Cumulatively, current account balance has shown a surplus of $805 million in July-August of FY21 compared to $1.214 billion deficit in corresponding period of last fiscal year.

Economists said that efforts to attract more workers’ remittances, flexible exchange rate, and relatively soften import prices explain the improvement in current account balance. “The lower import payment and higher home remittances inflows has largely contributed to turn the current account deficit into surplus during initial months of this fiscal year,” they added.

They said that despite a challenging environment, the country’s external sector is remained resilient since the Coronavirus outbreak and expected to perform well in coming months.

According to SBP, inflows of home remittances increased significantly on the back of orderly exchange rate conditions and supportive policy steps taken by the SBP. Pakistan received highest-ever workers’ remittances amounted to $2.76 billion in July and monthly inflows are also more than $2 billion for the last three months.

In addition, the low global oil prices and subdued domestic demand has reduced the goods import bill by 13 percent or $974 million to $6.7 billion in first two months of this fiscal year.

The surplus current account balance will also help to build the country’s foreign exchange reserves and SBP’s foreign exchange reserves reached to their pre-pandemic level of around $ 12.8 billion.

According to SBP, collective deficit of goods trade, services, and income stood at $ 4.77 billion in first two month of this fiscal year as against $ 5.397 billion in the same period of last fiscal year.

With contraction in imports, the country's overall goods trade deficit fell to $ 3.3 billion in July-Aug of FY21 as against $ 3.6 billion in corresponding period of last fiscal year.

The SBP has already predicted that the current account deficit is expected to remain bounded at around 2 percent of GDP, they informed. Together with improved current account, expected private and official flows, should continue to keep Pakistan’s external position stable in FY21, it added.

Copyright Business Recorder, 2020