The current account was nearly balanced in February, posting a deficit of only $12 million compared to a deficit of $399 million in the previous month. For the first eight months of FY25 (8MFY25), the current account stood at a surplus of $691 million, a significant improvement from the $1,730 million deficit recorded in the same period last year.
In February, both imports and exports declined. Imports fell by 8 percent to $5.0 billion, while exports dropped by 13 percent to $2.6 billion compared to the previous month. The trade balance in goods remained largely unchanged from January. The improvement in the current account balance was driven by a lower primary income deficit and a higher secondary income balance.
However, the financial account remains negative due to increasing loan repayments, resulting in an overall balance of payments deficit for the third consecutive month and the fourth time in eight months of the fiscal year
Imports, on a payment basis, remained above $5 billion for the second consecutive month. However, on a shipment basis, they declined to $4.8 billion in February after exceeding $5 billion for the previous two months. Consequently, import payment pressure is expected to ease in March, helping the current account post a surplus, especially as home remittances are likely to remain strong due to seasonal inflows.
According to SBP payment data, imports rose by 11 percent to $38.3 billion in 8MFY25, while PBS shipment data recorded an 8 percent increase to $37.8 billion. The lower growth in value is mainly due to declining commodity prices. For example, petroleum product and crude import volumes increased by 9.5 percent and 20.3 percent, respectively, yet the overall value rose by a mere one percent.
The government is adopting the right policy under the pressure of the IMF to increase the petroleum levy at a time of falling international prices. This move is aimed at curbing petroleum sales growth.
A notable increase in imports is observed in machinery, which rose by 22 percent to $5.4 billion in 8MFY25. The most significant surge is in textile imports, which increased by 60 percent to $3.7 billion. Raw cotton imports doubled to $1.3 billion due to poor domestic harvests. Additionally, relaxed taxation refunds for imports under the EFS have encouraged importers, while exporters face delays in refunds for domestic purchases. As a result, many prefer importing raw materials, limiting the potential for higher textile exports.
Overall, goods exports grew by 7 percent to $21.8 billion in 8MFY25. However, food exports declined by 4 percent to $4.6 billion, primarily due to a 12 percent drop in rice exports to $2.1 billion. This decline was expected as India returned to the export market. The shortfall in rice exports was offset by a surge in sugar exports, which reached $396 million compared to just $20 million in the same period last year.
Textile exports increased by 8 percent to $11.6 billion from July to February. However, low-value-added segments underperformed—yarn exports declined, and cloth exports stagnated. Growth was mainly driven by value-added sub-sectors, with knitwear, bedwear, and readymade garments all experiencing double-digit growth. These three categories remain the largest contributors to textile exports.
The goods trade deficit worsened by 17 percent to $16.5 billion. Despite the strong performance of services exports, the overall goods and services deficit widened by 19 percent to $18.8 billion. IT exports stood at $305 million in February, aligning with the 12-month average of $307 million. In 8MFY25, ICT exports increased by 26 percent to $2.48 billion.
The standout performer remains home remittances, which increased by 4 percent from the previous month to reach $3.1 billion. For 8MFY25, inward remittances surged by 33 percent to $24.0 billion, keeping the current account in surplus despite the growing trade deficit.
However, there is no silver lining in the capital and financial accounts, as both FDI and loans have dried up. As a result, the overall balance of payments remains negative, with SBP reserves declining by $984 million from their peak in mid-December.
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