Pakistan’s current account balance has achieved a significant surplus of $805 million during the first two months of the current fiscal year, driven by higher remittance inflows and reduced import payments, according to the State Bank of Pakistan (SBP).
The SBP’s Balance of Payment (BOP) statistics, released on Wednesday, indicate a marked improvement compared to the previous fiscal year’s deficit of $1.21 billion during the same period.
The contraction in the trade deficit played a crucial role in this positive turnaround in balance of payment. The trade deficit narrowed by 7.48 percent to $3.4 billion in July – August 2020, down from $3.69 billion in the corresponding period of the previous year. This reduction was primarily due to a significant decline in imports, which fell by 5.85 percent to $6.99 billion from $7.43 billion in the same timeframe last year.
Despite the positive overall balance, the export sector did experience a downturn. Exports decreased by 4.25 percent, totaling $3.58 billion during the reviewed period, compared to $3.74 billion in the previous fiscal year. This drop in exports underscores ongoing challenges in international trade and the need for enhanced competitiveness and diversification in Pakistan’s export offerings.
A major contributing factor to the surplus in current account balance was the substantial increase in workers’ remittances, which surged by 31 percent. Remittance inflows reached $4.86 billion during July – August 2020, up from $3.71 billion in the same months of the prior year. This surge reflects the resilience of overseas Pakistani workers and their continued support to the country’s economy amid global economic uncertainties.
The substantial growth in remittances can be attributed to multiple factors, including efforts by the government and the SBP to facilitate remittance flows through formal banking channels. These measures include reducing transaction costs, enhancing the ease of sending money, and providing incentives for using official remittance channels.
Economists and financial experts have welcomed the surplus in current account balance as a positive indicator of economic stability and resilience. The improvement in the current account balance provides a buffer against external economic shocks, supports the value of the Pakistani rupee, and enhances investor confidence. However, they also caution that sustaining this positive trend requires continuous efforts to boost exports and maintain the inflow of remittances.
Pakistan’s current account surplus of $805 million in the first two months of the fiscal year highlights the country’s ability to improve its economic indicators through strategic financial management and the robust support of its diaspora. As the nation continues to navigate global economic challenges, maintaining and building on these gains will be essential for long-term economic health and stability.
