Pakistan’s balance of payments recorded a current account deficit of $662 million in December 2020, breaking a streak of five consecutive months of surplus, according to data released by the State Bank of Pakistan (SBP) on Wednesday.
Despite the December shortfall, the country’s external position showed signs of relative stability during the first half of the fiscal year 2020-21. From July to December, the current account posted a surplus of $1.13 billion, marking a substantial improvement over the current account deficit of $2.03 billion recorded in the same period of the previous fiscal year.
The narrowing of the deficit was largely supported by a notable increase in workers’ remittances and reduced deficits in services and primary income. According to the SBP, inflows from overseas Pakistanis rose significantly to $14.2 billion during the six-month period, up from $11.73 billion in the same span last year. These remittances played a pivotal role in offsetting the pressures from trade imbalances.
However, the trade front remained a key challenge. The current account was negatively impacted by the trade in goods, which posted a deficit of $11.40 billion in the first half of the fiscal year, up from $9.74 billion during the corresponding period of the previous year. This increase in trade deficit indicates a rise in imports, outpacing the growth in exports.
Similarly, the trade in services also contributed to the external deficit, although the shortfall decreased year-on-year. The services sector recorded a deficit of $977 million during the July–December period, compared to $1.69 billion a year earlier.
The balance of primary income, which includes payments on investments and interest, showed a deficit of $2.73 billion, a slight improvement from $3.15 billion in the prior year. This also affected the current account, albeit to a lesser extent.
In summary, while the December figures reflect a setback, the overall six-month performance of Pakistan’s current account remains positive, offering a cautiously optimistic outlook for the remainder of the fiscal year.