KARACHI: Pakistan has posted the current account surplus during the July-September quarter – the first quarterly positive after more than five years, as remittances into the country and import curb helped the government rebuild its anemic foreign exchange reserves, the central bank’s data showed on Wednesday.
The current account posted a surplus of $792 million or 1.2 percent of gross domestic product in the first quarter of the current fiscal year compared with a deficit of $1.5 billion or 2.3 percent of GDP in the same period a year earlier, according to the State Bank of Pakistan (SBP).
The SBP’s data showed that the current account recorded a surplus for a third consecutive month in September. The surplus reached $73 million as against the deficit of $278 million a year ago. That was compared with a surplus of $211 million in the previous month.
Analyst said the current account improved due to a rise in remittances. Remittances increased 31.1 percent to $7.1 billion in July-September FY2021. Remittances rose 17 percent quarter-on-quarter in July-September.
“The current account surplus certainly helps stop bleeding in reserves,” said Muzzammil Aslam, CEO at Tangent Capital Advisors. “Importantly, exports are recovering to a pre-pandemic level which resulted in a surplus.”
Imports fell 3.8 percent to $10.6 billion during the quarter. But imports of goods increased 12 percent over the previous quarter.
Exports of goods declined 10.5 percent to $5.4 billion in the first three months of this fiscal year, while exports improved 26 percent quarter-on-quarter.
Analysts said the September current account balance came in better-than-expected position, where largely a deficit was anticipated based on earlier released numbers by Pakistan Bureau of Statistics. “The discrepancy exists because SBP relies on receipts and payments of foreign exchange to compile its data while PBS monitors physical movement of goods,” said Atif Zafar, an analyst at Topline Securities. “The impact of this may reflect in Oct-2020 C/A balance.” Earlier, the central bank said continued buoyancy in remittances and a broad-based rebound in exports drove the current account surplus in September.
“Imports also picked up in line with the ongoing revival in domestic economic activity,” it said. Balance on trade in goods deteriorated by $140 million or 8 percent month-on-month in September due to an increase in imports.
The financial account recorded a deficit of $510 million in September due to repayment of loans. Foreign direct investment remained muted at $189 million. The overall balance of payment recorded a deficit of $423 million in September with the SBP reserves closing September at $12.2 billion from closing of $12.7 billion in August 2020. The latest SBP’s reserves stand at $11.8 billion. “Looking forward, we expect the deficit to clock in at $2.5-3 billion in FY21 (1 to 1.2 percent of GDP) as COVID-19 related lockdowns and restrictions ease globally and international oil prices also trend up,” Zafar said.