KARACHI: The country’s current account posted a surplus of $654 million in March after a gap of over two years supported by higher home remittances inflows and contraction in imports.
The State Bank of Pakistan (SBP) on Wednesday reported that Pakistan posted a current account surplus of $654 million in March 2023 as against a deficit of $36 million in February 2023. The current account has recorded the first monthly surplus since November 2020.
Cumulatively, the current account deficit also fell sharply 74 percent during the first nine months of this fiscal year (FY23). Current account recorded a $3.4 billion deficit in July-Mar of FY23 compared to a deficit of $13 billion in July-Mar FY22, depicting a decline of $9.6 billion.
Analysts said that tighter monetary stance and fiscal measures along with administrative steps taken by the government have largely contributed to the lower current account deficit during this fiscal year. Inflows of workers remittances posted a healthy growth of 27 percent in March 2023 and clocked in at $2.53 billion as against $ 1.98 billion in Feb 2023.
Home remittances are improving after the elimination of cap on exchange rate that stabilized the exchange rate in the interbank banks and encouraged the overseas Pakistanis to send remittances through official channels.
In addition, a notable reduction in imports also led to a major improvement in the current account situation. As the country’s foreign reserves are at low level, a number of administrative measures were taken to curb the imports aimed to save the precious foreign exchange. Although most of the restrictions on imports have been removed, however, imports are still not fully resumed.
Overall import bill declined by 22 percent to $ 41.4 billion in July-March of FY23 down from $ 52.7 billion in corresponding period of last fiscal year. In addition, with $ 21 billion exports and $ 41.4 billion exports, the trade deficit also reduced by 30 percent to $20.4 billion in the first nine months of this fiscal year.
Balance of trade in goods, services and the income sector posted $ 24.5 billion deficit during the first nine months of this fiscal year as against $ 37 billion in the same period of last fiscal year.
Analysts said that although the country’s current account deficit is improving, the balance of payments position remained under stress because of low foreign exchange reserves. Currently, the foreign exchange reserves held by the State Bank stood at $4.038 billion at the end of last week and these reserves are sufficient for the one month imports.
They said that the current account balance will remain muted for the remainder of the year. As per estimates current account deficit for the fiscal year 2023 may be $3.5 billion or 1 percent of GDP. However Pakistan’s main issue is the external debt repayment crisis.
Pakistan is negotiating with the IMF and other lenders to get fresh inflows to build the foreign exchange reserves and overcome the crisis.
Copyright Business Recorder, 2023
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