Current account turns positive on back of falling imports
KARACHI: The State Bank of Pakistan (SBP) on Monday reported the first current account surplus for the ongoing fiscal year in November.
Despite low inflows and higher outflows for debt servicing, the current account was in surplus by $9 million in November compared to a deficit of $157m noted in the same month last year.
However, the current account deficit (CAD) narrowed by almost 63pc to $1.16 billion in July-November FY24 from $3.26bn in the same period last year. October witnessed a CAD of $184m.
The major impact was visible in the fall of imports, as goods imports fell by over $4 billion to $21.3bn during the five months of the current fiscal year. However, exports of goods slightly increased by $596m to $12.5bn during the same period. This decline in imports had a positive impact on the current account surplus in November.
Exports of services declined by $103m to $2.99bn in the same period, compared to an increase in imports of services by $704m to $4.1bn. The trade deficit has been a key element in keeping the current account up or down.
Experts predict a total current account deficit of around $6bn by the end of this fiscal year, while the SBP governor, in a statement, said this deficit would not cross 1.5pc of GDP.
The last two quarters of the previous fiscal year FY23 noted a surplus; the third quarter noted a surplus of $579m, while the fourth quarter witnessed a surplus of $815m. This was an encouraging trend, but the new fiscal year FY24 began with a current account deficit till November.
Experts said remittances have improved in the last two months of the current fiscal year, but overall, they declined by 10.3pc during July-Nov FY24.
Some experts believe the government is awaiting the results of two more strategies to bring in inflows. The talks with the International Monetary Fund (IMF) were successful, and the country is hopeful to receive $700m from the lenders.
However, due to a 10pc decline in remittances, inflows fell by $1.3bn in the five months of FY24. FY23 was already a loss-making year regarding remittances since inflows fell by $4bn during the year.
The government did not investigate why remittances declined by $4bn in FY23 and why they are still declining despite all administrative measures to curb the illegal business of currencies, including the smuggling of dollars.
Another expectation is attached to the high-profile $100bn five-year project of the Special Investment Facilitation Council (SIFC).
Experts say confidence-building measures are required to attract more remittances. The confidence of overseas Pakistanis in the economy is at the lowest level, mainly due to prolonged uncertainty that engulfs both politics and the economy.
Published in Dawn, December 19th, 2023