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November 19, 2019

Current account balance posts $99 million surplus in October


November 19, 2019

KARACHI: Current account balance posted a $99 million surplus in October, up from a $284 million deficit in the previous month of September, the central bank said on Monday.

The October current account surplus is the nation’s first in almost four and a half years. The central bank data showed that the country last witnessed surplus of $518 million in March 2015.

Current account deficit narrowed 74 percent to $1.474 billion in July-October of the current fiscal year of 2019/20, from $5.567 billion in the same period of last fiscal year.

The current account gap represented 1.6 percent of gross domestic product in July-October FY20, down from 5.5 percent of the GDP in the same period last year.

During the last fiscal year, current account deficit stood at $13.830 billion and in FY18 the deficit stood around $19.897 billion. The current account deficit is projected to be at 2.5-3.5 percent of GDP this year.

Analysts said the decline in current account deficit was caused by improvement in external trade. According to the Pakistan Bureau of Statistics data, trade deficit fell 33.5 percent in July-October FY20, while imports of goods dropped 22.9 percent to $14.656 billion in the first four months of current fiscal year.

Exports grew slightly by 3.4 percent to $8.220 billion, the SBP data showed. Foreign direct investment into Pakistan rose 238.7 percent in the first four months of the current fiscal year to $650 million.

However, remittances fell to $7.478 billion in July-October FY20 from $7.617 billion a year ago. The SBP, in its annual report for FY18/19, presented a positive outlook for the external sector in FY20, albeit being subject to both upside and downside risks. Exports were projected to pick up during the year, depending on the demand conditions among the country’s major trading partners and buoyancy in the commodity markets.

“In particular, onset of fiscal stimulus and successful resolution of trade negotiations involving major economies would be instrumental in supporting global consumer demand, which would in turn bode well for exporting partners, including Pakistan, along with improved prospects of foreign investments,” SBP report said.

The Free Trade Agreement (FTA-II) with China and preferential trade agreement with Indonesia might also boost exports, it suggested.

Decline in imports would be instrumental in improving the current account as the policy induced import compression would continue on top of subdued prices, barring any adverse shock from international oil prices.

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