Pakistan logs small current account surplus of $18m in April

KARACHI: The current account surplus narrowed to $18 million in April, down from $750 million the previous month, the central bank data showed on Tuesday. The decrease was attributed to a slight reduction in imports and lower remittances.

In April 2022, the country had reported a deficit of $640 million. However, the country has experienced consecutive months of current account surpluses, primarily driven by a decrease in the trade deficit resulting from import restrictions. While imports declined during the period, the pace of decline was slower.

"In my view, there is a possibility that some prior payments are being released, as import statistics by the State Bank of Pakistan (SBP) are higher than as reported by the Pakistan Bureau of Statistics (PBS)," analyst Samiullah Tariq at Pak-Kuwait Investment Company said.

"I believe remittance numbers were already known because they were released earlier. The surprise was the import number." The reduced pressure on the external current account has been facilitated by a weaker currency, import limitations, restrictions on foreign exchange availability, fiscal tightening, and higher interest rates.

In April, imports decreased by 7 percent compared to the previous month, amounting to $3.707 billion. Year-on-year, imports fell by 38 percent in April. Exports in April totaled $2.112 billion, reflecting a 13 percent decline from the previous month. On a monthly basis, exports dropped by 33 percent in April. The decrease in exports can be attributed to falling commodity prices and weakened global demand.

Remittances for the current fiscal year's first ten months (July to April) declined by 13 percent to $22.7 billion. In April alone, remittances witnessed a year-on-year decline of 29 percent, amounting to $2.2 billion. There was also a 13 percent month-on-month decrease in remittances.

The current account deficit for the ten months of the current fiscal year stood at $3.3 billion, which is 76 percent lower compared to the $13.7 billion deficit during the same period last year.

Although the current account balance remained in surplus, the overall balance of payments situation remains delicate. Foreign exchange reserves stand at $4.4 billion, which is only sufficient to cover one month's worth of imports, indicating their low levels.

Pakistan's economy has been stagnant for several months, primarily due to a severe balance of payment crisis and concerns of default. The prolonged delay in the International Monetary Fund (IMF) program and ongoing political unrest are crippling the country's economy.

It is essential to consider that Pakistan's funding choices remain unpredictable, even if it manages to pay the $3.7 billion due by June 30th. Without the support of the IMF plan, obtaining external financing would prove challenging. In April, Pakistan witnessed a net foreign direct inflow of $122 million, marking a 29 percent decline compared to the previous year.