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Another month of current account hanging in balance – although there is a marginal deficit of $74 million in October. The current account deficit is down by 66 percent to $1.1 billion in Jul-Oct 2023. In 4MFY24, the export proceeds remained almost stagnant while the imports are down by 20 percent, and some of the gains are washed out due to higher deficitin trade services, pending dividend payments, and percent dip in inward remittances.

Goods imports stood at $16.8 billion in Jul-Oct,which is 20 percent lower than the same period last year. Most of the decline is due to dip in import of petroleum (down by 43 percent to $4.3 bn); barring petroleum segment, imports are down by 7 percent.

Food imports are down by 24 percent (or by $707 million) to $2.3 billion. There has been no significant wheat import payment in this fiscal year so far – lowering the food import bill by $340 million. The other reason is lower imports of palm oil and soybean oil – combined with the two, payments are down by 28 percent (or $364 mn) to $980 million. The fall is mainly due to lower international prices- as PBS data suggest that there is an increase in the quantity imported.

Machinery imports are almost at last year’s level in 4MFY24 –marginally down by 2 percent to $1.95 billion. Barring telecom, machinery imports are down by 15 percent. Last year, there was a case of imports restriction, and this year, the demand is perhaps lower than last year’s restricted levels. There is some uptick in the import of mobile phone– here, SBP is only showing CBU in mobile phones while clubbing CKD imports under other apparatus (while PBS is showing CKD and CBU together in mobile phone). Mobile phones imports doubled (as per PBS) to $470 million, and the pickupaccelerated in October – clocking in at $166 million which is highest since April 22.

Not every other discretionary spent is growing. The story of car sales is rather depressing. These are down to 30 percent from peaklevels of 2021. And it’s even less than last year’s demand for restricted supply. Interestingly, on paymentbasis, transport imports are almost at last year’s level, and CKD car imports are in fact up by 12 percent to $291 million. However, based on PBS data, car sales are showing a rather dismal picture – down by 58 percent in 4MFY24 to $208 million.

The biggest decline in the imports is in the petroleum segment where both demand and pricing are falling, and some of the imports (especially in HSD) are going to smuggling from Iran. The petroleum import bill is down by 43 percent to $4.3 billion in 4MFY24. Sales of petrol are down by 4 percent, and the decline is sharper in diesel which dips by 8 percent.

In the case of exports proceeds, October was a good month – these stood at $2.8 billion, which is the highest since June 22. Due tocurrency appreciation in October, exporters hurried to realize their proceeds (including forward booking), which is why exports picked up in October – and the trend is likely to continue in November when exporters have mostly sold in forward.

In 4MFY24, the performance of textile exports hasremained sluggish – down by 12 percent to $5.5 billion (SBP data) and the other exports are up by 25 percent to $4.3 billion. The performance of other manufacturing goods remained sluggish – down by 7 percent. The gain is mainly in food and all other exports, up by 25 percent and 19 percent, respectively.

Overall, trade deficit in goods is reduced by 38 percent to $7 billion. In the case of services, exports are up by 3 percent while imports are up by 20 percent, and overall deficit of trade is reduced by 33 percent to $7.9 billion.

The balance of primary income deficit has worsened by 62 percent to $2.7 billion. The deficit stood at $881 million in October, which is the highest ever recorded number. Growth is primarily in primary income debit – which stood at $933 million in October, as due to better inflows, SBP allowed the banks to pay pending dividends which perhaps is reflecting under this line item. However, a significant backlog is yet to be cleared.

Then, remittances also dipped by 13 percent to $8.8billion in 4MFY24. The decline is mainly due to shift of remittances to informal segment, as in the first three months of the fiscal year, informal imports were higher and were perhaps netted against reduction in formal remittances. In October there was an uptick in remittances which stood at $2.46 billion -highest since March 23.

Going forward, due to slowdown in the economy and falling international commodity prices, the current account is likely to hang in balance. That is good for the external account, but bad for the falling employment.


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